GASB requiring new government tax incentive disclosures

The standard aims to provide more information for financial statement users.

State and local governments will be required to make new disclosures about tax incentives they agree to, according to a new GASB standard.

It's common for state and local governments to give businesses tax incentives and tax breaks, many times in order to secure a promise for a business to locate in their state or area, which can spark economic growth and job creation.

GASB Statement No. 77 requires new government disclosures about such agreements with entities and individuals. The new disclosures about a government's own tax abatement agreements include:

  • The purpose of the tax abatement program.
  • The tax being abated.
  • The dollar amount of taxes abated.
  • Provisions for recapturing abated taxes.
  • The types of commitments made by tax abatement recipients.
  • Other commitments made by a government in tax abatement agreements, such as to build infrastructure assets.

The new standard also requires disclosures about tax abatements that are entered into by other governments that reduce the reporting government's tax revenues. These include:

  • The name of the government entering into the abatement agreement.
  • The tax being abated.
  • The dollar amount of the reporting government's tax being abated.

The standard takes effect for financial statements for periods beginning after Dec. 15, 2015. GASB encourages earlier application.

SPONSORED REPORT

2018 financial reporting survey: Challenges and trends

Learn the top reporting challenges that emerged in a survey of more than 800 finance, accounting, and compliance professionals across the world, and compare them with your organization's obstacles.

PODCAST

How the skill set for today’s CFO is changing

Scott Simmons, a search expert for large-company CFOs, gives advice for the next generation of finance leaders and more, including which universities are regularly producing future CEOs and CFOs.