PROJECT UPDATE

Improvements to Income Tax Disclosures

Last updated on December 21, 2022. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Sections updated on the date above are indicated with an asterisk *)

 

Objective:

The objective of the Improvements to Income Tax Disclosures project (formerly the Disclosure Framework: Disclosure Review—Income Taxes project) is to improve the transparency and decision usefulness of income tax disclosures.
 

Background:

In March 2022, the Board discussed recent feedback received, including feedback on the June 2021 Invitation to Comment, Agenda Consultation and agreed that the purpose of this project is to better meet the information needs of financial statement users in making capital allocation decisions, through incremental and achievable improvements to income tax disclosures. As a result, the Board revised the project objective to improve the transparency and decision usefulness of income tax disclosures and revised the project scope to primarily focus on income taxes paid and the rate reconciliation table.

Under current project: Improvements to Income Tax Disclosures

In March 2022, the Board revised the project objective to improve the transparency and decision usefulness of income tax disclosures and revised the project scope to primarily focus on income taxes paid and the rate reconciliation table.

A proposed Update is expected to be issued, with a comment letter period of 75 days, after the Board votes by written ballot.

Under former project: Disclosure Framework: Disclosure Review—Income Taxes

In March 2014, the former project of Disclosure Framework: Disclosure Review—Income Taxes was added to the agenda as one of the Disclosure Framework (FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting—Chapter 8, Notes to the Financial Statement) Topics to analyze. Under the former project, two proposed Updates were issued.

Exposure Draft:

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 was September 30, 2016. 
 

Comment Letters:

 

Revised Exposure Draft:

On March 25, 2019, the Board issued a revised proposed Accounting Standards Update, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes. The due date for comment letters was May 31, 2019. 
  • Download the March 25, 2019 revised proposed Accounting Standards Update, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes.
 

Comment Letters:


The following media releases and educational materials are associated with the two proposed Updates issued under the former project, Disclosure Framework: Disclosure Review—Income Taxes.

Decisions Reached at Last Meeting (November 30, 2022):

The Board discussed potential disclosure improvements to income taxes paid and the rate reconciliation, as well as certain disclosures in the 2019 revised proposed Accounting Standards Update, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes (2019 revised Exposure Draft). The Board made the following decisions.

Income Taxes Paid

The Board decided to require that all entities disclose income taxes paid disaggregated by federal, state, and foreign taxes. The Board decided to require this disclosure for the year-to-date amount of income taxes paid on both an interim and annual basis.

The Board decided to require that all entities disclose income taxes paid disaggregated by individual jurisdiction on the basis of a quantitative threshold of 5 percent of total income taxes paid. The Board decided to require this disclosure on an annual basis only.

The Board clarified that the disclosure of income taxes paid is the amount net of refunds received.

Rate Reconciliation

The Board decided to require that public business entities, on an annual basis:
  1. Disclose rate reconciliation information by the following specific categories, at a minimum, with accompanying qualitative disclosures:
    1. State and local income tax, net of federal income tax effect
    2. Foreign tax effects
    3. Enactment of new tax laws
    4. Effect of cross-border tax laws
    5. Tax credits
    6. Valuation allowances
    7. Nontaxable or nondeductible items
    8. Changes in reserves for tax positions.
  2. Provide a qualitative disclosure about the states that contribute to the majority of the effect of the state and local income tax, net of federal income tax effect category.
  3. Separately disclose reconciling items by nature, on the basis of a quantitative threshold of 5 percent, within the effect of cross-border tax laws, tax credits, and nontaxable or nondeductible items categories.
  4. Separately disclose reconciling items by nature and by jurisdiction, on the basis of a quantitative threshold of 5 percent, within the foreign tax effect category.
  5. Separately disclose reconciling items by nature, on the basis of a quantitative threshold of 5 percent, for other items that do not fall within any specific category.
The Board decided to require that public business entities disclose rate reconciliation information using both percentages and dollar amounts.

The Board decided to require that public business entities provide a qualitative disclosure, on an interim basis, about the reconciling items that cause significant year-to-date changes of the effective tax rate from the prior annual reporting period.

The Board decided not to provide additional guidance on the rate reconciliation disclosure for entities operating at or about break even or entities domiciled in jurisdictions with a minimal statutory tax rate.

The Board decided to require that nonpublic entities provide a qualitative disclosure about specific categories and individual jurisdictions that result in a significant difference between the statutory tax rate and the effective tax rate.

Certain Disclosures Previously Exposed for Comment

The Board affirmed the following three amendments in the 2019 revised Exposure Draft:

  1. Replace the term public entity with the term public business entity.
  2. 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.
  3. Remove the requirement to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures.
The Board decided to add to Topic 740 the following income tax disclosures for all entities. These disclosures were referred by the SEC as part of the FASB project on Disclosure Improvements in Response to the SEC’s Release on Disclosure Update and Simplification and were included in the 2019 revised Exposure Draft.

  1. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign
  2. Income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign taxes.
The Board decided to re-expose those disclosures as part of this project.

Transition


The Board decided that entities should apply the amendments on a retrospective basis, that is, as of the beginning of the earliest period presented in the financial statements.

Analysis of Costs and Benefits


The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs of the proposed amendments and that the expected benefits of those amendments would justify the expected costs.

Next Steps

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 75 days.

Tentative Board Decisions Reached to Date (as of November 30, 2022):

A summary of decisions reached to date can be found here.

Previous Tentative Board Decisions Prior to March 23, 2022:

A summary of decisions reached prior to March 23, 2022 can be found here.

The Board meeting minutes, handouts, and videos 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.
 
The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
 
November 30, 2022
Board Meeting—Improvements to Income Tax Disclosures
May 11, 2022 Board Meeting—Improvements to Income Tax Disclosures
March 23, 2022 Board Meeting—Improvements to Income Tax Disclosures
February 12, 2020 Board Meeting—Disclosure Review
February 27, 2019 Board Meeting—Disclosure Review
January 23, 2019 Board Meeting—Disclosure Review
November 14, 2018 Board Meeting—Disclosure Review
January 25, 2017 Board Meeting—Disclosure Review
June 8, 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

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 75 days.

Lucy Cheng
Project Manager
lcheng@fasb.org

Jenifer Wyss
Supervising Project Manager
jjwyss@fasb.org

Jennifer Kimmel
Practice Fellow
jkimmel@fasb.org

Emerson Porter
Postgraduate Technical Assistant
eporter@fasb.org

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

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