It is probably not documented because of this or any number of things. I only know it exists because I dig through ACF code a lot, which is the same way I just discovered why it wasn’t working for you. When showing a select field ACF uses it’s own function to list the terms, where this filter is called. When showing checkboxes and radio field ACF uses wp_list_categories()
which is pretty much unfilterable. I don’t know why there’s a difference other that the developer hasn’t gotten to it.