FASB proposes more changes in income tax disclosures

The Financial Accounting Standards Board is proposing to make further changes in the income tax disclosure requirements for companies to make them more relevant to users of financial statements.

FASB issued a revised proposal Monday for an accounting standards update that takes into account the changes in the Tax Cuts and Jobs Act. FASB originally issued a proposed accounting standards update in In July 2016 describing some revised disclosure requirements for income taxes as part of a broader disclosure framework project aimed at improving the effectiveness of disclosures in notes to financial statements. But FASB ended up delaying finalization of the update because of talk in Washington of potential tax reform. The federal government eventually passed the Tax Cuts and Jobs Act at the end of 2017, which significantly changed taxation of U.S. businesses. As a result, FASB decided to revise its proposed update.

The latest proposed update reflects these revisions, along with some of the feedback FASB received in response to its original July 2016 proposal. The revised proposal would eliminate some disclosures that aren’t considered cost effective or relevant anymore as well as add disclosure requirements now seen as relevant to financial statement users.

The changes would require disclosures for all entities about:

1. Income (or loss) from continuing operations before income tax expense (or benefit) and before intra-entity eliminations disaggregated between domestic and foreign;
2. Income tax expense (or benefit) from continuing operations disaggregated between federal, state and foreign; and
3. Income taxes paid disaggregated between federal, state and foreign.

Other proposed disclosures would be required for public business entities:

1. The line items in the statement of financial position in which the unrecognized tax benefits are presented and the related amounts of such unrecognized tax benefits;
2. The amount and explanation of the valuation allowance recognized and/or released during the reporting period; and
3. The total amount of unrecognized tax benefits that offsets the deferred tax assets for carryforwards.

FASB is asking for comments on the latest iteration of the proposed accounting standards update by May 31, 2019.

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