FASB proposes improvements to income tax disclosures

The proposed amendments would enhance income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s worldwide operations. The proposed ASU’s two primary enhancements would disaggregate existing disclosures for the effective tax rate reconciliation and income taxes paid.  

Applicability

• All companies that are subject to income taxes

Relevant dates

• March 15, 2023 – FASB issued proposed ASU
• May 30, 2023 – Comments due

Key impacts

The proposed amendments would require entities to disclose:   

• For public business entities, a tabular effective tax rate reconciliation, broken out into specific categories with certain reconciling items above a 5% threshold further broken out by nature and/or jurisdiction.
• For other entities, the nature and effect of significant differences between the statutory tax rate and the effective tax rate by specific categories of reconciling items, including individual jurisdictions.
• Income taxes paid (net of refunds received), broken out between federal, state and foreign; and net amounts paid to an individual jurisdiction that exceed 5% of the total.

The proposal also incorporates certain previously exposed amendments, such as replacing the term ‘public entity’ with ‘public business entity’ and the removal of certain disclosures. 

Report contents

• Source and applicability
• Fast facts, impacts, actions
• Proposed enhancements and other changes
• Tabular rate reconciliation for PBEs
• Transition and effective date
• Next steps

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