Project Update

Disclosure Framework—Disclosure Review: Income Taxes

Last updated on January 12, 2017. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective and Overview
Due Process Documents
Decisions Reached at Last Meeting
Tentative Board Decisions Reached to Date
*Next Steps
Board/Other Public Meeting Dates
*Contact Information

Project Objective and Overview

The objective and primary focus of the Disclosure Framework project is to improve the effectiveness of disclosures in the notes to financial statements by clearly communicating the information that is most important to users of each entity’s financial statements. Achieving the objective of improving effectiveness requires development of a framework that promotes consistent decisions about disclosure requirements by the Board and the appropriate exercise of discretion by reporting entities.

To achieve that objective, the Disclosure Framework project comprises two components: the Board’s Decision Process and the Entity’s Decision Process.

Currently, four disclosure areas are being evaluated as part of the Disclosure Framework project. Each review will include (1) evaluation of existing disclosure requirements within the Topic after applying the concepts in the Board’s decision process and (2) promotion of the appropriate use of discretion by entities specifically within the Topic.

This page provides updates on the disclosure review of Income Taxes (740-10-50). For information on the other three disclosure reviews, see the following:
  1. Defined Benefit Plans (715-20-50)
  2. Fair Value Measurement (820-10-50)
  3. Inventory (330-10-50)
Additionally, disclosure requirements for Interim Reporting are being evaluated for modifications.

The FASB staff has developed a “Q&A: FASB’s Disclosure Framework Project” fact sheet which can be viewed here.

Due Process Documents

On July 26, 2016, the Board issued a proposed Accounting Standards Update, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes. The due date for comment letters is September 30, 2016.

Decisions Reached at Last Meeting (June 08, 2016)

The Board completed its initial deliberations on the disclosure requirements for income taxes.

The Board reversed its previous decision and decided not to require an entity to disaggregate the cumulative amount of indefinitely reinvested foreign earnings for any country that represents at least 10 percent of the total cumulative amount. Instead, the Board decided to require disclosure of the aggregate of cash, cash equivalents, and marketable securities held by foreign subsidiaries.

Currently, some disclosure requirements in Topic 740, Income Taxes, are required of public entities and some are required of nonpublic entities. The Board decided to replace the term public entity with the term public business entity as defined in the Master Glossary of the Codification. The result is that some disclosures will be required of public business entities while other disclosures will be required of entities other than public business entities.

The Board decided to require an entity to disclose the terms of any rights or privileges granted by a governmental entity directly to the reporting entity that have reduced, or may reduce, the entity’s income tax burden.

The Board decided to revise the carryforward disclosure requirement in Topic 740 for a public business entity. A public business entity would be required to disclose:
  1. The amount of federal, state, and foreign carryforwards (not tax effected) by time period of expiration for each of the first five years after the reporting date and a total of the amounts for the remaining years.
  2. The deferred tax asset for carryforwards (tax effected) before valuation allowance disaggregated by federal, state, and foreign. Those amounts should be further disaggregated by time period of expiration for each of the first five years after the reporting date and a total of the amounts for the remaining years
The Board decided to revise the carryforward disclosure in Topic 740 for entities other than public business entities so that the amounts of federal, state, and foreign carryforwards (not tax effected) should be disclosed.

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 60 days or ending on September 30, 2016, whichever is longer.

Tentative Board Decisions Reached to Date

Tentative Board Decisions Reached to Date

*Next Steps

The Board will consider feedback on the proposed Accounting Standards Update at a future meeting.

Additionally, the FASB will host a public roundtable meeting on the Board’s decision process under the disclosure framework and on materiality in Norwalk, Connecticut on March 17, 2017. The roundtable meeting is an important part of the Board’s due process on the Exposure Drafts. The first session of the roundtable will be an opportunity for those who have submitted a comment letter on the Exposure Draft of Chapter 8 or any of the four Topical reviews (defined benefit plans, fair value measurement, income taxes, and inventory) to discuss with the FASB the effects of the proposed concepts on disclosures. The second session is an opportunity for those who have submitted a comment letter on either materiality Exposure Draft (Chapter 3 or proposed Update on Topic 235) to discuss their feedback with the FASB.

To ensure that a variety of perspectives is received, the Board is seeking participation from preparers, auditors, investors, and others. Those who desire to participate in one of the roundtable sessions should notify the FASB by submitting an online participation form by February 27, 2017. The roundtable meeting can accommodate a limited number of participants. Depending on the number of responses received, the Board may not be able to accommodate all requests to participate.

Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

June 08, 2016 Board Meeting —Disclosure Review
March 23, 2016 Board Meeting—Disclosure Review
October 21, 2015 Board Meeting—Disclosure Review
August 26, 2015 Board Meeting—Disclosure Review
February 11, 2015 Board Meeting—Disclosure Review
January 7, 2015 Board Meeting—Disclosure Review
April 4, 2014 Board Meeting—Field Study Results and Next Steps

*Contact Information

Nick Cappiello
Supervising Project Manager

Jaime Dordik
Assistant Project Manager

Jin Koo
Practice Fellow

Mallory Bennett
Postgraduate Technical Assistant

Haoran Jiang
Postgraduate Technical Assistant