For many businesses filing their financial statements using XBRL to comply with the SEC mandate, the phrase “extension taxonomy” is a largely misunderstood term. There is a narrow view that it is only about adding brand-new company-specific elements which do not exist in the base taxonomy (Ex: US GAAP 2009).

The SEC is allowing companies to ease into compliance, laying out a two-phase mandate. During the first year, only the face of the financials must be tagged with XBRL, necessitating anywhere from 300 to 500 discrete XBRL tags. But in year two, that number increases almost exponentially, requiring anywhere from 2,000 to 4,000 discrete tags, depending upon your unique business environment.