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Journal entry — Disclosure framework — FASB discusses disclosures about income taxes, interim reporting, and inventory

Published on: Jan 09, 2015

At its meeting this week, the FASB discussed (1) income tax disclosures, particularly related to unremitted foreign earnings; (2) interim reporting disclosures and potential changes based on its proposed concepts statement1; and (3) the possibility of expanding the scope of its Disclosure Review — Inventory project.

Income Taxes


The FASB staff outlined potential revisions to the disclosure requirements in ASC 7402 that would enhance a financial statement user’s understanding of foreign taxes. This project is largely driven by findings in the post-implementation review of FASB Statement No. 109, Accounting for Income Taxes, that users want more information that will allow them to analyze (1) “the cash effects associated with income taxes, particularly current period taxes paid by jurisdiction (e.g., U.S. and foreign), and estimate future tax payments” and (2) “earnings determined to be indefinitely reinvested in foreign subsidiaries.”

Under the potential requirements presented by the FASB staff, entities would disclose:

  • Foreign earnings for each jurisdiction that is individually significant.
  • Domestic tax expense recognized for taxes on foreign earnings and earnings that, during the current period, are no longer asserted to be indefinitely reinvested; such disclosures may need to be aggregated as well as provided for each jurisdiction that is individually significant.
  • Deferred tax liabilities (DTLs) for unremitted foreign earnings for each jurisdiction that is individually significant.
  • The estimated unrecognized DTL for unremitted foreign earnings, if any, as calculated on the basis of “simplified assumptions.”
  • The accumulated amount of indefinitely reinvested foreign earnings for any jurisdiction for which the amount is significant.
  • Past events or current conditions that have changed management’s plans on undistributed foreign earnings.

The FASB discussed the nature of the potential disclosures, expressing differing views regarding benefits to investors and the complexities of preparing them. No decisions were made.

Implications and Next Steps

The FASB staff will conduct further outreach and analysis related to this project over the coming months. This will include evaluating in greater detail the potential disclosure requirements as well as other opportunities to improve the effectiveness of disclosures required under ASC 740. It is expected that any revisions to disclosure requirements about foreign earnings and related taxes will be further deliberated by the FASB (and exposed for comment) in combination with other potential amendments to the disclosure requirements in ASC 740. An exposure draft is not expected until the second half of this year.

Interim Reporting

The FASB discussed five interim reporting concepts under its proposed concepts statement. The Board generally agreed that interim financial statements should describe “differences in recognition, measurement, and presentation of line items” and should explain “how the interim period relates to the entire year” (see the meeting handout). Two of the interim reporting concepts pertained to disclosing changes from the latest annual financial statements (paragraphs 19(b) and 19(e) in the meeting handout), and two pertained to disclosing items that are not peripheral or are “especially important” (paragraphs 19(c) and 19(d) in the meeting handout).

To determine the meaning of especially important, each Board member will assess the interim disclosure requirements being proposed in the Boards’ Disclosure Review — Fair Value Measurement project as well as the interim disclosure requirements related to revenue in ASC 270-10-50-1A. On the basis of this process, the FASB can assess whether entities should disclose an item or amount that has not changed but is “especially important” (i.e., whether an interim disclosure should be required (1) when an item has changed and is especially important or (2) when the item has changed or is especially important). No decisions were made.


The scope of the FASB’s Disclosure Review — Inventory project is limited to ASC 330. The Board deliberated whether the cost of sales and services under ASC 705 should be added to the project and tentatively decided that when staff resources become available, it would consider conducting pre-agenda research on whether to add the topic to the FASB’s agenda as a separate disclosure review project.


1 FASB Exposure Draft, Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements.

2 For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.” 

Journal entry — Disclosure framework — FASB discusses disclosures about income taxes, interim reporting, and inventory Image

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