Newly Issued FASB Rules Require Fuller Disclosure of Taxes Paid in US, Other Countries

New disclosure rules from the Financial Accounting Standards Board (FASB) increase the transparency around income taxes companies pay in the U.S. and other countries. The rules will take effect for public companies as of December 15, 2024, and for private companies the following year.

Partner Ro Sokhi encourages companies to start planning for the new standards as early as possible. He said companies will need to disclose the following eight categories in the rate reconciliation table by both percentages and amounts, under the new guidance:

• State and local income tax in the country of domicile, net of federal income tax effect
• Foreign tax effects, including any state or local taxes in foreign jurisdictions
• Enactment of new tax laws
• Effect of cross-border tax laws
• Tax credits
• Valuation allowances
• Nontaxable or nondeductible items
• Changes in unrecognized tax benefits

Additionally, a further breakdown is required for individual items in the foreign tax effects category that meet or exceed a 5% threshold for the effects of cross-border tax laws, tax credits, and nontaxable or nondeductible items, Sokhi explained. Annually, companies will also need to disclose income taxes paid, net of refunds, by jurisdiction, if the amounts equal or exceed a quantitative threshold of 5% of total income taxes paid, net of refunds.

Read the full article published by Reuters.