FASB addresses income tax disclosures for undistributed foreign earnings

By Ken Tysiac

As part of its disclosure framework project, FASB began its review this week of disclosures related to income taxes, with a focus on undistributed foreign earnings.

The disclosure framework project is designed to streamline disclosures, which have grown in complexity and volume in recent years. FASB aims to reduce complexity while retaining important information for financial statement users.

According to FASB’s website, the board made several tentative decisions Wednesday, which would not become final until the board takes a final ballot and issues an accounting standards update. The board tentatively decided that entities would be required to disclose:

  • Income before taxes disaggregated between domestic and foreign earnings. Foreign earnings would further be disaggregated for any country that is significant to total earnings.
  • Domestic tax expense recognized in the period for taxes on foreign earnings.
  • Undistributed foreign earnings that are no longer asserted to be indefinitely reinvested during the current period and an explanation of the circumstances that cause the entity to make that assertion. Separate disclosure should be made for any country that is significant to the disclosed amount.
  • A further disaggregation of the current requirement to disclose the temporary difference for the cumulative amount of indefinitely reinvested foreign earnings if any country represents at least 10% of the disclosed amount.

FASB tentatively decided not to require disclosure of:

  • Disaggregation of deferred tax liabilities recorded for unremitted foreign earnings by country.
  • An estimate of the unrecognized deferred tax liabilities on the basis of simplified assumptions.
  • Past events or current conditions that have changed management’s plans for undistributed foreign earnings.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.


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