At its meeting last week, the FASB continued to deliberate various income tax disclosure requirements as part of its disclosure framework project. The Board made further tentative decisions, which are summarized below.

Indefinitely Reinvested Earnings

The Board redeliberated and reversed its earlier tentative decision requiring a reporting entity to disaggregate its “cumulative amount of indefinitely reinvested foreign earnings for any country that represents at least 10 percent of the total cumulative amount.”¹ In place of the reversed tentative decision, the Board tentatively decided to require a reporting entity to disclose “the aggregate of cash, cash equivalents, and marketable securities held by [its] foreign subsidiaries.”

Operating Loss and Tax Credit Carryforwards

The Board redeliberated its earlier tentative decisions about the disclosure requirements related to operating loss and tax credit carryforwards of public entities. Specifically, it revised a previous tentative decision and decided to require a public entity to disclose the following:

• The gross amounts of operating loss and tax credit carryforwards (as reported on a tax return) disaggregated by federal, state, and foreign jurisdictions. The gross amount of operating loss and tax credit carryforwards should also be disaggregated by the period of expiration for each of the first five years after the reporting date and a total of the amounts for all remaining years.
• The tax-effected amounts of such operating loss and tax credit carryforwards (as reported on a tax return) disaggregated by federal, state, and foreign jurisdictions. The amounts of the tax-effected operating loss and tax credit carryforwards should also be disaggregated by the time period of expiration for each of the first five years after the reporting date and a total of the amounts for all remaining years.

In addition, the Board decided to revise the disclosure requirement related to private entities and require such entities to disaggregate the gross amount of operating loss and tax credit carryforwards by federal, state, and foreign jurisdictions.

Other Tentative Decisions

For purposes of income tax disclosures, the Board tentatively decided that the term “public entity” as currently defined in ASC 740² should be replaced with “public business entity” as defined in the Codification Master Glossary. The definition of a public business entity, which was added to the Codification by ASU 2013-12,³ includes certain types of entities than are not included in ASC 740’s definition of a public entity, such as an entity that (1) has issued securities that can be transferred without restriction and (2) is required to make its financial statements publicly available on a periodic basis. These additional entities would be subject to the disclosure requirements in ASC 740 that currently apply only to those entities included in the existing “public entity” definition.

As a result of decisions reached earlier in the same meeting related to the FASB’s proposed ASU⁴ on business entities’ disclosures about government assistance (see Deloitte’s June 14, 2016, journal entry), the Board further tentatively decided to require disclosure of “the terms of any rights or privileges granted by a governmental entity directly to the reporting entity that have reduced, or may reduce, the [reporting] entity’s income tax burden.”⁵

The Board did not redeliberate other previously reached tentative decisions related to income tax disclosures. For summaries of the Board’s earlier tentative decisions related to income tax disclosures under the disclosure framework project, see Deloitte’s journal entries dated February 12, 2015 (undistributed foreign earnings); August 28, 2015 (unrecognized tax benefits); October 26, 2015 (various income tax disclosure requirements); and March 29, 2016 (indefinitely reinvested earnings and other income tax disclosures).

Next Steps

The Board asked its staff to draft a proposed ASU for vote by written ballot. The proposed ASU will have a comment period of 60 days or ending on September 30, 2016, whichever is longer.

____________________

1 Quoted text is from the Tentative Board Decisions page on the FASB’s Web site.

Download