The Financial Accounting Standards Board today issued an accounting standards update to address what it said have been investor requests to provide more transparent information about a company’s income taxes. Specifically, the update requires consistent categories and greater disaggregation of information in the rate reconciliation, and disclosure of income taxes paid disaggregated by jurisdiction. The update also includes other amendments to improve the effectiveness of income tax disclosures, FASB said.
“Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid, to evaluate income tax risks and opportunities,” FASB said in the update. “While investors find these disclosures helpful, they suggested possible enhancements to better (1) understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (2) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (3) identify potential opportunities to increase future cash flows.”
For public companies, the standard is effective after Dec. 15, 2024. For other entities, the amendments are effective after Dec. 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance, FASB said.
ABA Banking Journal Staff
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