Investors Await Disclosure Rules on Income Taxes Paid
FASB Chair Richard Jones reassured advisers that a proposal the board plans to issue next year on income taxes paid would enable investors to understand more about a company’s global tax position. “For a U.S. company, to the extent that there’s a material driver of their overall tax rate below the U.S. statutory rate, that will be illustrated on a jurisdiction-by-jurisdiction basis,” he said at the Dec. 6 Financial Accounting Standards Advisory Council (FASAC) meeting. “And so what we’ve chosen to do is to use the effective rate reconciliation to highlight those jurisdictions that increase and or decrease the effective rate, versus the statutory rate,” he said. “Practically speaking we recognize the financial statements are conveying information in a complex manner and we’re trying to find a way to communicate key issues and the key risks and opportunities in the most appropriate way and that’s what the rate reconciliation we think does.” His remarks were in response to a FASAC member’s observations that questioned whether the proposal would go far enough for investors. Cash taxes that companies pay represents a blind spot for investors, lacking transparency into how worldwide operations affect a company’s tax rate, as well as the legislative risks and opportunities. Today, investors rely on current disclosures of the rate reconciliation table, as well as total income taxes paid in a cash flows statement to evaluate a company’s risks or opportunities.
AICPA Panel and PCC to Hold Advisory Session with FASB
On December 16, FASB will meet with the Private Company Council (PCC) and separately with an AICPA technical issues committee to discuss private company financial reporting topics, according to a board alert. The PCC, which works with the board to develop and amend U.S. GAAP for private companies, is set to meet with the board on December 16 to discuss various topics, including the following:
- Leases—Implementation (Topic 842, Leases)
- Profits interest
- Revenue—Post-Implementation Review (Topic 606, Revenue from Contracts with Customers)
- Accounting for government grants (Invitation-to-Comment (ITC) 2022-002, Accounting for Government Grants by Business Entities: Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles)
- Accounting and disclosure of software costs
- Accounting for and disclosure of crypto assets.
Keeping Accounting Rules Converged IS Beneficial to Global Capital Markets.
Convergence with U.S. accounting standards is “still an important consideration” for the IASB although formalized talks have concluded, Chair Andreas Barckow told an industry conference in Washington, D.C.
Over the years, the IASB’s focus has shifted from jointly developing solutions to keeping international financial reporting standards (IFRS) converged with U.S. GAAP, he said on Dec. 12 at the 2022 AICPA & CIMA Conference on Current SEC and PCAOB Developments. “We achieve that by bringing the two boards together for education and information-sharing sessions, by talking regularly to our colleagues at FASB at all levels, and by alerting each other of new information and developments arising,” he said in a speech. “I hope that you all agree with me in seeing the great benefit this brings to global capital markets.” He cited accounting standards on business combinations, consolidations, fair value measurement, leases, revenue recognition, and segment reporting, as a few important areas where the standards are globally converged—but he pointed to financial instruments and insurance contracts as areas where they were not able to achieve full compatibility. The issue of convergence is one that consistently is broached at accounting conferences, and one that is of interest to multinational companies that use both IFRS and U.S. GAAP.