- The Financial Services Council on Wednesday advanced a project that is ready to improve the income tax information that companies are required to publish in their financial statements. .
- The stricter standards will cause companies to disclose income taxes paid at different levels for federal, state and foreign entities, according to sources familiar with the FASB. The company is also required to identify any jurisdiction – such as the country or state – that receives more than 5% of the tax payment. Under current standards, companies are not required to provide such breaks.
- The FASB is also on track to require clearer reconciliations from companies when the effective tax rate differs from the statutory tax rate. The effective tax rate is usually based on what is paid after credits and other compensation.
An improved income statement is one of the priorities that came out of the long-term efforts made in 2020 by the newcomers. FASB Chairman Richard Jones. The FASB’s effort, which received more than 500 responses, ended in June and led to a revised schedule.
Reforming income tax standards had been on the FASB’s wish list for several years before Jones arrived. In the month of May lecture at Baruch College in New York City, Jones noted that the topic was first included in the 2014 high-priority technical agenda.
“Despite two documents, major changes in tax law, 100 comment letters, and many other campaigns over the years, we still have not been able to define a clear path,” said Jones at Baruch, noting that investor participation is essential. helping to update the project’s objectives to focus on improving the transparency and relevance of tax information.
“Investor feedback from the agenda’s consultation process puts us on the path to what I call ‘deliverable standard setting’ – and by that, I mean projects that fulfill our mission and can be done,” Jones said.
The FASB is on track to issue an update to the accounting standards for income taxes by the end of the first quarter of 2023. Then it will receive feedback from stakeholders and decide whether to make changes to the proposal before voting for final approval. updated standards.
At Wednesday’s FASB meeting, many FASB members expressed support for the updated guidance. “This project has been a long time coming,” said FASB member Gary Buesser. “When I first came into office, the project was dead in the water. I think We’ve taken a big step here and I think investors will welcome it very enthusiastically.”