United States

Proposed disclosure requirements for income taxes


The Financial Accounting Standards Board recently issued a proposed Accounting Standards Update (ASU), Income Taxes (Topic 740): Disclosure Framework — Changes to the Disclosure Requirements for Income Taxes. If finalized, the proposed ASU would require the following additional disclosures, among others, related to income taxes:

  • Description of an enacted change in tax law that is probable to have an effect on the reporting entity in a future period
  • Certain income tax information disaggregated between domestic and foreign
  • An explanation of circumstances that caused a change in assertion about the indefinite reinvestment of undistributed foreign earnings and the corresponding amount of those earnings
  • The aggregate of cash, cash equivalents and marketable securities held by foreign subsidiaries

In addition, the following disclosures, among others, would be required for public business entities:

  • Within the reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period, settlements using existing deferred tax assets separate from those that have been or will be settled in cash
  • 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
  • The amount and explanation of the valuation allowance recognized and/or released during the reporting period
  • The total amount of unrecognized tax benefits that offsets the deferred tax assets for carryforwards

The proposed ASU also would modify the existing rate reconciliation requirement for public business entities to be consistent with SEC Regulation S-X 210.4-08(h), which requires separate disclosure for any reconciling item that amounts to more than five percent of the amount computed by multiplying the income before tax by the applicable statutory federal income tax rate. The proposed ASU would further modify the requirement to explain the changes in those reconciling items from year to year. Among other disclosure revisions, the proposed ASU also would require an entity to disclose the description of a legally enforceable agreement with a government, including the duration of the agreement and the commitments made with the government under that agreement and the amount of benefit that reduces, or may reduce, its income tax burden.

Further, if finalized, the proposed ASU would eliminate the requirement for all entities to (a) disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or (b) make a statement that an estimate of the range cannot be made.

The proposed ASU is available for comment until September 30, 2016.