The Biden administration is planning to add another reporting requirement for publicly traded companies. This time it’s taxes paid to jurisdictions a company does business in. The beneficiaries of the new rule are investors who want as much info about a company’s assets and liabilities before risking their money.
The Financial Accounting Standards Board (FASB) is moving forward with specific tax disclosure requirements despite opposition from credit card companies and Wall Street. Some GOP Congressional lawmakers argued that opening up companies’ tax records would give foreign competitors an edge in negotiating tax rates.
FASB rewrote the rule twice based on stakeholders’ concerns and voted 7-0 to require that companies must now specify federal, state and foreign jurisdictions that receive 5% or higher cuts of taxes paid, per year. Country-by-country tax disclosures aren’t required (FASB initially considered making that a reporting duty).
Rate reconciliation must be done by disaggregation into eight specific categories. Then those eight categories must be broken down by jurisdiction and for amounts 5% or above the domestic tax rate. Rate reconciliation must also show dollar amounts paid and percentages (under current regs, companies can report one or the other).
FASB says the new requirements won’t pose costly or onerous reporting duties on companies. No word on whether the board polled accountants first before reaching their conclusion!
The tax disclosure requirements are slated to go into effect in mid-December 2024, with reporting duties starting in 2025. FASB hasn’t posted them to its Federal Register page yet.
It’s been a very busy year for FASB
Forcing companies to specify where its taxes are going isn’t the only big change to come from FASB. Over the past 12 months, the board introduced new requirements for companies’:
- employee compensation, depreciation of “property, plant and equipment,” amortization of intangible assets and costs capitalized to inventory in their income statements (we covered it here), plus
- fair-value accounting for crytocurrency assets such as bitcoin, and
- commercial building lease terms and conditions.
Some good news: The final rule listed above would scale back the level of detail and frequency of reporting for companies.
