What is a Taxonomy?

A taxonomy is a grouping of financial concepts (known as “elements”) in which each concept is defined (similar to a dictionary).  Additionally, the taxonomy also defines the relationships between the concepts within the group.  Therefore, if we are working with a balance sheet item such as Cash, the taxonomy would include the definition of Cash and would also demonstrate how Cash may relate to other balance sheet items (within the taxonomy) such as rolling up to Current Assets and eventually Total Assets. All three of these items (Cash, Current Assets, and Total Assets) are financial concepts that are defined and presented in the taxonomy as elements.  Public taxonomies have been developed by market constituents and are maintained by XBRL.

The US GAAP Taxonomies contain over 15,000 elements representing commonly reported financial concepts for US GAAP financial statements and are available and maintained by XBRL US.

What is a Taxonomy Extension?

The X in XBRL stands for eXtensible. Therefore, if a particular concept does not already exist in a public taxonomy there is the ability to add to or change the elements to meet the company’s needs; called extending the taxonomy. This extensibility is one of the most important aspects of XBRL because it allows for wide adaptation and uses of XBRL.

What is Tagging?

Tagging is the process of applying the entity’s unique financial data to an element within the taxonomy. The tagging process is performed during the creation of an instance document.

What is an Instance Document?

An instance document is the file that includes the company specific business reporting information in a structured manner that computers can intelligently recognize and exchange.  It is expected that instance documents will be created for individual financial reports (e.g., annual reports, earnings releases, submissions to creditors, etc.). The instance document is an XML file where everything comes together; here the entity specific data links (tags) to the elements in the taxonomies to form the XBRL document that can be validated and transmitted automatically for utilization by numerous consumers.

What is Rendering?

As we stated above, an instance document is an XML file that is computer readable.  Rendering is the process in which XBRL software will translate an instance document into a human readable format.

We could have written all this ourselves, but why waste time when it is already available (and has already been written so many times). The information above comes from the definitive explanations provided by XBRL International and the AICPA. Additional information can be found here: