Tax

FASB Seeks Improved Income Tax Disclosures

The proposal would require companies to disclose the aggregate of cash, cash equivalents, and marketable securities held by foreign subsidiaries.
David KatzJuly 27, 2016

The Financial Accounting Standards Board yesterday issued a proposed Accounting Standards Update containing what it contends are improvements in its current disclosure requirements on income taxes.

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The proposed ASU would change existing disclosure requirements for income taxes as well as provide new ones. The changes include requiring companies to describe an enacted change in tax law; disaggregate certain income tax information and sort it between foreign and domestic; and explain what caused a change in an assertion about “the indefinite reinvestment of undistributed foreign earnings.”

Further, the proposal would also require companies to disclose the aggregate of cash, cash equivalents, and marketable securities held by foreign subsidiaries.

On the plus side, FASB also proposes to curb “disclosure of future-oriented information to that which is used as inputs to measurements in the financial statements or in the notes to financial statements,” according to the update.

As a result, the standards update would eliminate the requirement for companies to “disclose the nature and estimate of the range of [a] reasonably possible change in the unrecognized tax benefits balance in the next 12 months [,] or make a statement that an estimate of the range cannot be made.”

The proposed ASU is part of the FASB’s broader disclosure framework project aimed at boosting “the effectiveness of disclosures in notes to financial statements by clearly communicating the information that is most important to users of a reporting organization’s financial statements.”

Income taxes is one of four areas in which the board is evaluating improvements to existing disclosure requirements. The others are employer disclosures of defined-benefit plans, fair value, and inventory.

The deadline for comments on the proposed update is September 30.

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