Project Update

Disclosure Framework—Disclosure Review: Income Taxes

Last updated on April 1, 2016. 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
*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.

*Decisions Reached at Last Meeting (March 23, 2016)

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

The Board affirmed its prior decisions to require all entities to disclose the following:
  1. That a change in tax law that is probable to have an effect on the entity in a future period has been enacted
  2. Income (loss) before income tax expense (benefit) disaggregated between domestic and foreign
  3. Income taxes paid disaggregated between domestic and foreign.
The Board decided that all entities would be required to disaggregate:
  1. Income tax expense (benefit) between domestic and foreign
  2. Foreign income taxes paid to any country that are significant relative to total income taxes paid.
The Board clarified its prior decision related to the temporary difference for the cumulative amount of investments associated with undistributed foreign earnings that are essentially permanent in duration. All entities would be required to disclose the following:
  1. The amount of and explanation for a change in assertion about the temporary difference for the cumulative amount of investments associated with undistributed earnings that are asserted to be essentially permanent in duration
  2. The amount of and explanation for a change in assertion about the temporary difference for the cumulative amount of investments associated with undistributed earnings that are no longer asserted to be essentially permanent in duration.
The Board decided to reverse its prior decisions and not require all entities to disclose the following:
  1. The line item(s) on the balance sheet in which the amount of deferred taxes are presented
  2. Domestic income tax expense (benefit) on foreign sourced earnings.
The Board decided to reverse its prior decisions and not require private companies to disclose the following:
  1. The rate reconciliation that is currently required for public companies
  2. An explanation of the nature and amounts of the valuation allowance recorded and/or released during the reporting period
  3. The amounts and expiration dates of operating loss and tax credit carryforwards recorded on the tax return basis, the amounts and expiration dates of carryforwards that will give rise to a deferred tax asset (tax effected), and the total amount of the unrecognized tax benefit that offsets the tax-effected carryforwards.
The Board decided to require prospective transition for all income tax disclosures.

The Board directed the staff to perform further outreach on the operability of disclosing the aggregate of cash, cash equivalents, marketable securities, and loans related to the temporary difference for the cumulative amount of investments associated with undistributed earnings that are essentially permanent in duration.

*Tentative Board Decisions Reached to Date

Tentative Board Decisions Reached to Date

*Next Steps

The Board directed the staff to perform further outreach on the operability of disclosing the aggregate of cash, cash equivalents, marketable securities, and loans related to the temporary difference for the cumulative amount of investments associated with undistributed earnings that are essentially permanent in duration.

*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.

*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
ntcappiello@fasb.org

Jaime Dordik
Assistant Project Manager
jadordik@fasb.org

Jin Koo
Practice Fellow
jkoo@fasb.org

Carter Meneley
Postgraduate Technical Assistant
cdmeneley@fasb.org

Melissa Rutzen
Postgraduate Technical Assistant
marutzen@fasb.org