June 14, 2023
Financial Reporting: FASB’s Controversial Tax Disclosure Proposal
In mid-March, FASB issued an Exposure Draft to solicit public comment on proposed changes to ASU Topic 740: Income Taxes. Per FASB’s press release, comments were due May 30, 2023. As reported by CFO Dive, the proposal, which is the third time FASB has attempted to tackle this topic, would require more explicit accounting breakdowns of the taxes companies pay, and has elicited extensive feedback from companies and business and investor groups.
The comments ranged from something akin to “this is a non-starter” from the US Chamber of Commerce to investor groups stating that the new disclosures “fall short.” As a middle-of-the-road example, the comment letter from one corporate stakeholder urged FASB to provide companies sufficient time to comply since tax systems and controls will need to be updated. The FASB staff will now analyze the comments and present to the Board.
As Liz has blogged, “tax impact” has been growing as an ESG issue for a number of years, and tax transparency shareholder proposals are on the rise. So companies may be moving toward more tax disclosure whether or not FASB approves the proposed accounting standards update.
– Meredith Ervine