The Financial Accounting Standards Board has proposed a new accounting standards update that would require public and private companies to change the way they report income taxes on their financial statements.
The changes include distinguishing certain foreign and domestic income tax information, such as income or loss from continuing operations before an income tax or benefit, and the amount of income paid to any country that is a significant part of total income taxes paid by the company. Other changes and additions include explaining the reason behind a change in assertion about the indefinite reinvestment of undistributed foreign earnings, and discussing the likely impact of recently enacted tax laws on the organization’s future performance. The proposed changes also would require organizations to disclose the aggregate of cash, cash equivalents and marketable securities held by their foreign subsidiaries.
The proposed update distinguishes between the disclosure requirements for public companies and other types of organizations.
The proposal is part of FASB’s disclosure framework project, which aims to make the disclosures in notes to financial statements more effective by stressing the information that would be most important to investors and other users of the statements. Income taxes are just one area where FASB is weighing changes to the current disclosure requirements. Others include an employer’s disclosure of defined benefit plans, fair value measurement and inventory.
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