The Financial Accounting Standards Board has opened up the public comment period on a proposed accounting standard update to generally accepted accounting principles that would require preparers and companies to provide more explicit breakdowns on the taxes they pay and where they pay them, according to a press release Wednesday
The more stringent standards would make companies detail the income taxes paid to federal, state and foreign entities and, in effect, require companies to identify any jurisdiction — such as a country or state — that receives more than 5% of the company’s total tax payments, CFO Dive previously reported. Companies currently aren’t required to provide this information.
“The FASB’s proposed improvements to income tax disclosure, primarily related to the rate reconciliation and income taxes paid information, are intended to help investors better assess how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows,” FASB Chair Richard Jones stated in the release.
Revising the income-tax standards has been on the FASB’s wishlist for a number of years. It was even contemplated prior to the 2020 arrival of Jones, who has overseen an ambitious stakeholder outreach project that resulted in a new slate of topics that are deemed ripe for standards updates and prioritized by the board.
But previous efforts to address accounting standards for taxes have fizzled. In a speech last year Jones lamented that the topic has been a long time coming, having been originally added to the organization's prioritized technical agenda in 2014. However, he said at the time that the agenda consultation process led the board to revise the project to focus on improving the disclosures that lead to transparency, positioning FASB for what he called “achievable standard setting.”
The FASB has requested feedback by May 30. The timeline for finalizing a standards update depends on the nature of the feedback that the FASB gets, FASB spokesperson Christine Klimek wrote in an email.