Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
Wednesday, November 30, 2022 FASB Board Meeting
Interim reporting—narrow-scope improvements. The Board continued redeliberations on the proposed Accounting Standards Update, Interim Reporting (Topic 270): Disclosure Framework—Changes to Interim Disclosure Requirements, and decided:
- That Section 270-10-45 should only apply to interim financial statements in accordance with GAAP and not apply to interim financial information that an entity may choose to provide.
- To leverage existing guidance in paragraph 205-10-45-1A to describe interim financial statements and notes in accordance with GAAP for purposes of applying Topic 270.
- To include a reference in Topic 270 to relevant U.S. Securities and Exchange Commission (SEC) regulations for the form and content of interim financial statements for entities that are SEC registrants.
- To include both of the following descriptions of acceptable formats for interim financial statements and notes in accordance with GAAP for entities that are not SEC registrants:
- Financial statements presented using the same level of aggregation as the annual financial statements and notes subject to all disclosure requirements in GAAP
- Financial statements that may be aggregated in a condensed format and/or limited notes subject to the disclosure requirements of Topic 270.
- To provide guidance on the content of condensed financial statements for entities that are not SEC registrants by leveraging guidance in Rule 10-01 and Rule 8-03 of SEC Regulation S-X.
- To clarify the reference to annual financial statements by leveraging the SEC language in Regulation S-X, Rule 210.10-01(a)(5), for all entities.
- For entities that are not SEC registrants, to clarify that to apply Topic 270 guidance, those entities should make annual financial statements available to their users.
- To require entities that are not SEC registrants to disclose that interim financial statements are to be read in conjunction with the prior annual financial statements and notes when providing condensed financial statements.
Targeted improvements to income tax disclosures. The Board discussed potential disclosure improvements to income taxes paid and the rate reconciliation, as well as certain disclosures in the 2019 revised proposed Accounting Standards Update, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes (2019 revised Exposure Draft). The Board made the following decisions.
Income Taxes Paid
The Board decided to require that all entities disclose income taxes paid disaggregated by federal, state, and foreign taxes. The Board decided to require this disclosure for the year-to-date amount of income taxes paid on both an interim and annual basis.
The Board decided to require that all entities disclose income taxes paid disaggregated by individual jurisdiction on the basis of a quantitative threshold of 5 percent of total income taxes paid. The Board decided to require this disclosure on an annual basis only.
The Board clarified that the disclosure of income taxes paid is the amount net of refunds received.
The Board decided to require that public business entities, on an annual basis:
- Disclose rate reconciliation information by the following specific categories, at a minimum, with accompanying qualitative disclosures:
- State and local income tax, net of federal income tax effect
- Foreign tax effects
- Enactment of new tax laws
- Effect of cross-border tax laws
- Tax credits
- Valuation allowances
- Nontaxable or nondeductible items
- Changes in reserves for tax positions.
- Provide a qualitative disclosure about the states that contribute to the majority of the effect of the state and local income tax, net of federal income tax effect category.
- Separately disclose reconciling items by nature, on the basis of a quantitative threshold of 5 percent, within the effect of cross-border tax laws, tax credits, and nontaxable or nondeductible items categories.
- Separately disclose reconciling items by nature and by jurisdiction, on the basis of a quantitative threshold of 5 percent, within the foreign tax effect category.
- Separately disclose reconciling items by nature, on the basis of a quantitative threshold of 5 percent, for other items that do not fall within any specific category.
The Board decided to require that public business entities provide a qualitative disclosure, on an interim basis, about the reconciling items that cause significant year-to-date changes of the effective tax rate from the prior annual reporting period.
The Board decided not to provide additional guidance on the rate reconciliation disclosure for entities operating at or about break even or entities domiciled in jurisdictions with a minimal statutory tax rate.
The Board decided to require that nonpublic entities provide a qualitative disclosure about specific categories and individual jurisdictions that result in a significant difference between the statutory tax rate and the effective tax rate.
Certain Disclosures Previously Exposed for Comment
The Board affirmed the following three amendments in the 2019 revised Exposure Draft:
- Replace the term public entity with the term public business entity.
- Eliminate the requirement for all entities to (a) disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or (b) make a statement that an estimate of the range cannot be made.
- Remove the requirement to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures.
- Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign
- Income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign taxes.
The Board decided that entities should apply the amendments on a retrospective basis, that is, as of the beginning of the earliest period presented in the financial statements.
Analysis of Costs and Benefits
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs of the proposed amendments and that the expected benefits of those amendments would justify the expected costs.
The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot, with a comment period of 75 days.