FASB Proposes Changes to Income Tax Disclosure

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Michael P. Kurtz, CPA

In March, the Financial Accounting Standards Board (FASB) issued a revised proposed Accounting Standards Update (ASU), Income Taxes (Topic 740) – Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes.  The proposed ASU is a revision of an exposure draft issued by the FASB in July 2016, which was FASB’s broader disclosure framework project to improve the effectiveness of disclosures in notes to financial statements.  FASB delayed finalizing the proposal, because of the federal government passing the Tax Cuts and Jobs Act in December 2017.

For all entities, the ASU would include requirements to disclose the following:

  • Income, or loss, from continuing operations before income tax expense (or benefit) and before intracompany eliminations, disaggregated between domestic and foreign
  • Income tax expense, or benefit, from continuing operations disaggregated between federal, state and foreign
  • Income taxes paid disaggregated between federal, state and foreign

For entities other than public business entities, the ASU would require the following to be disclosed:

  • Total amounts of federal, state and foreign credit carryforwards and the total amounts of other federal, state and foreign carryforwards, separately for those carryforwards that do not expire and those that expire, along with their expiration dates (or a range of expiration dates)
  • Line items in the balance sheet in which the unrecognized tax benefits are presented and the related amounts of such unrecognized tax benefits
  • The amount and explanation of the valuation allowance recognized and/or released during the reporting period
  • The total amount of unrecognized tax benefits that offsets the deferred tax assets for carryforwards
  • The amounts of federal, state and foreign carryforwards—tax-effected before any valuation allowance—by time period of expiration for each of the first five years after the reporting date, a total for any remaining years and a total for carryforwards that do not expire
  • The valuation allowance associated with the total tax-effected amounts of federal, state and foreign carryforwards

For public business entities only, the ASU would require the following to be disclosed:

The ASU would remove disclosure requirements for all entities related to:

  • Nature and estimate of possible changes in unrecognized tax benefits for the next 12 months.
  • Cumulative amount of each type of temporary difference for which deferred taxes have not been recognized

FASB is seeking comments on the proposed ASU by May 31, 2019. Click here for more information and to download the full text of the ASU.