Chief Accountants: Proposed Revisions to Income Tax Disclosure Rules Too Costly to Prepare

Chief accountants and controllers from some of the nation’s largest companies have told FASB that it should backpedal on a proposal that would require them to disclose more details about their income tax payments overseas. The potential changes would be costly to prepare, and some of the resulting information could confuse investors, a technical committee of Financial Executives International (FEI) told the board. “We’re trying to understand what this is giving that we didn’t have. Who really needs this information?” Thomas Roos, senior vice president and chief accounting officer at UnitedHealth Group, said on behalf of the FEI’s Committee on Corporate Reporting (CCR). “A change isn’t needed—this seems to be inconsistent with what I think is the rate simplification effort we’ve been going through to try to keep it simple and straightforward.” The board issued the proposal in March 2019 to revise an earlier draft developed in 2016, prior to the passage of the Tax Cuts and Jobs Act of 2017. Among other items, the revisions would require companies to provide more detailed information about the taxes they pay by federal, state, and foreign jurisdiction, so that investors have additional information about net cash flows related to income taxes.

Securities Group Says Proposal Adversely Impacts Smaller Finance Services Firms

The Securities Industry and Financial Markets Association (SIFMA) says that a proposal FASB issued to incorporate some SEC disclosures into GAAP inadvertently requires smaller private broker-dealers, banks, asset management firms, and insurance companies to follow rules that would be a significant and costly departure from what they do today. In May 2019, FASB proposed the changes to require public companies to disclose in the notes to financial statements items previously kept in the nonfinancial statement portions of SEC filings. The board also said it was seeking input on whether the changes should apply to private companies and not-for-profit entities, believing any costs incurred would be insignificant. SIFMA said the proposal is based on an incorrect assumption that all, or significantly all, companies that meet FASB’s definition of public business entities (PBEs) are subject to SEC Regulation S-X and Regulation S-K. “The increase in cost associated with the proposed codification does not justify the benefit for industry, and runs counter to FINRA and other regulators’ efforts to reduce the burden on these entities.”



Revised PCAOB Audit Standards on Accounting Estimates Approved

The SEC has approved the PCAOB’s revised standard intended to improve auditors’ work on accounting estimates. The board published Release 2018-005, Auditing Accounting Estimates, Including Fair Value Measurements, in December 2018 after members unanimously voted to finalize audit standards that use a uniform, risk-based approach. Auditors had previously been using three different standards related to auditing accounting estimates. “The Board recognized the effort required for other implementation efforts, but stated the effective date determined by the Board was designed to provide auditors with a reasonable period of time to implement the Proposed Rules, without unduly delaying the intended benefits of the Proposed Rules,” the SEC noted. “We believe the Board has appropriately balanced the amount of time needed by audit firms to implement the Proposed Rules with the objectives of, and benefits obtained from, the Proposed Rules.”