Share

FASB Finalizes Proposed Income Tax Disclosure Rules. Is Your Company Ready?

The Financial Accounting Standards Board (FASB) recently voted to finalize disclosure rules that will require companies to provide more detailed and transparent information about their income taxes. These rules will affect how companies report amounts paid for income taxes between federal, state, and foreign jurisdictions. The rules will also require disaggregation by specific categories and jurisdictions and for amounts exceeding five percent of the company’s domestic statutory tax rates.

Background

ASU, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” is the result of a long-standing project that started with a proposed ASU in July 2016. The FASB’s objective was to improve the relevance and usefulness of income tax disclosures for investors and other users of financial statements. The FASB received and incorporated extensive feedback from various stakeholders throughout the process.

Key Provisions

• Rate reconciliation: Companies will be required to provide more detail, including the effect of enactment of new tax laws and foreign tax effects.
• Income taxes paid: Companies will have to disclose income taxes paid disaggregated by jurisdiction (federal, state, and foreign) rather than a lump sum amount. This will be required on an annual basis.

Timing

Public companies will be required to apply the ASU for fiscal years beginning after December 15, 2024, and interim periods for subsequent fiscal years. Private companies are required to adopt the standard one year later. Early adoption will be permitted for both public and private companies.

What Does This Mean for Your Company?

The ASU will have significant implications for companies that operate in multiple jurisdictions and face complex tax situations. Companies will have to assess the impact of the new rules on their future income tax disclosures and update their income tax reporting processes and internal controls to comply with the new rules.

How Centri Can Help

At Centri, our Tax Advisors are well-versed in the new income tax disclosure rules and can help companies navigate the complexities and challenges of implementing them. We can provide the following services:

• Impact assessment: We can help companies evaluate how the new rules will affect their income tax disclosures and identify any issues or opportunities that may arise.
• Implementation plan: We can help companies develop and execute a plan to adopt the new rules in a timely and efficient manner.
• Disclosure preparation and review: We can help companies prepare and review their income tax disclosures for completeness, accuracy, and compliance with the new rules and relevant accounting standards.
• Communication strategy: We can help companies communicate their income tax disclosures to their stakeholders, including investors, analysts, regulators, and auditors.

Your company can benefit from our expertise and experience in income tax reporting and disclosure. Let Centri help you enhance your income tax reporting quality and transparency, which can improve your credibility and reputation in the market.

Contact our Tax experts today.  If you have any questions or need any assistance with the new income tax disclosure rules, Centri can help.

Tim Cobb

Partner | Tax Advisory Practice Leader | CPA

Tim is a Partner at Centri Business Consulting and is the leader of the firm’s Tax Advisory Practice. He joined Centri in July 2023. View Tim Cobb's Full Bio