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Income Taxes – FASB Discusses Comments on its Proposal on Income Tax Disclosures NEW!

FASB Accounting Standards Updates - Accounting Standards Update No. 2019-12 —Income Taxes (Topic 740) —Simplifying the Accounting for Income Taxes 

Income Taxes – FASB Discusses Simplification to Income Taxes 

FASB Proposed ASU No. 2019-700 - Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes  

FASB Proposed Accounting Standards Update (Revised) 2019-500 —Income Taxes (Topic 740) —Disclosure Framework —Changes to the Disclosure Requirements for Income Taxes (Revision of Exposure Draft Issued July 26, 2016) 

Income Taxes -- FASB Discusses Disclosure Framework 

Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 - FASB ASU No. 2018-05 

Tax Cuts and Jobs Act - FASB Adds SEC Guidance to the Codification on the Tax Cuts and Jobs Act 

Income Taxes - FASB Discusses Financial Reporting for Tax Reform 

Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory - FASB ASU 2016-16 

Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes - FASB ASU 2015-17 

FASB Accounting Standars Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory 

FASB Accounting Standards Update No. 2016 -16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

FASB Proposed Accounting Standards Update 2016-270 - Income Taxes (Topic 740) - Disclosure Framework - Changes to the Disclosure Requirements for Income Taxes 

FASB Accounting Standards Updates No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes 


Articles

Income Taxes – FASB Discusses Comments on its Proposal on Income Tax Disclosures

Summary - As reported in its “Summary of Board Decisions” publication, the met on February 12, 2020 and discussed comment letter feedback received on its March 2019 revised proposed Accounting Standards Update (ASU), Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes.

The Board directed the staff to perform research and outreach on potential alternatives to disclose certain disaggregated income tax information. The Board also directed the staff to perform additional research on various other proposed amendments.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates - Accounting Standards Update No. 2019-12 —Income Taxes (Topic 740) —Simplifying the Accounting for Income Taxes

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, expected to reduce cost and complexity related to the accounting for income taxes.

The ASU removes specific exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles (GAAP). It eliminates the need for an organization to analyze whether the following apply in a given period:

Exception to the incremental approach for intraperiod tax allocation;
Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and
Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for:

  • Franchise taxes that are partially based on income;
  • Transactions with a government that result in a step up in the tax basis of goodwill
  • Separate financial statements of legal entities that are not subject to tax; and
  • Enacted changes in tax laws in interim periods.

The ASU is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Income Taxes – FASB Discusses Simplification to Income Taxes

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on September 4, 2019, and discussed a summary of comments received on its May 2019 proposed Accounting Standards Update, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The FASB’s discussion focused on the following topics:
Redeliberation issues;
Transition and effective date;
Analysis of costs and benefits; and
Next steps.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed ASU No. 2019-700 - Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes

Summary - The FASB has issued a proposed ASU intended to reduce cost and complexity for the accounting for income taxes. The proposal is a part of the FASB’s Simplification Initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.

The Proposal
The proposal would remove specific exceptions to the general principles in Topic 740, Income Taxes, in Generally Accepted Accounting Principles (GAAP). The proposed ASU eliminates the need for an organization to analyze whether the following apply in a given period:
  • Exception to the incremental approach for intraperiod tax allocation;
  • Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and
  • Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The proposed ASU also would improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for:
  • Franchise taxes that are partially based on income;
  • Transactions with a government that result in a step up in the tax basis of goodwill;
  • Separate financial statements of legal entities that are not subject to tax; and
  • Enacted changes in tax laws in interim periods.
The proposed ASU would not create new accounting requirements not previously included in Topic 740.

Comment Period
Stakeholders were asked to comment on the proposal by June 28, 2019.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed Accounting Standards Update (Revised) 2019-500 —Income Taxes (Topic 740) —Disclosure Framework —Changes to the Disclosure Requirements for Income Taxes (Revision of Exposure Draft Issued July 26, 2016)

Summary - The FASB has issued revised proposed Accounting Standards Update (ASU), Income Taxes (Topic 740) – Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes – Revision of Exposure Draft Issued July 26, 2016. The FASB intends the proposed amendments in the draft ASU to improve the relevance of current income tax disclosure requirements to financial statement users. Comments are due by May 31, 2019.

The proposed ASU is a revision of an exposure draft issued the FASB issued in July 2016. That proposed ASU set forth enhanced disclosure requirements for income taxes. It was part of the FASB’s broader disclosure framework project to improve the effectiveness of disclosures in notes to financial statements.

The FASB delayed finalizing the proposal because of potential tax reform. The federal government subsequently passed the Tax Cuts and Jobs Act in December 2017, which substantially changed how U.S. businesses are taxed. As a result, the FASB decided to revise its original proposal.

The new proposed ASU reflects these revisions, as well as stakeholder input on the original July 2016 proposal. The revised proposed ASU would (a) remove disclosures that no longer are considered cost beneficial or relevant; and (b) add disclosure requirements identified as relevant to financial statement users.

Additional Disclosures for All Entities
In additional disclosure requirements, Topic 740, Income Taxes, would require all entities to provide the following disclosures:
• Income (or loss) from continuing operations before income tax expense (or benefit) and before intra-entity eliminations disaggregated between domestic and foreign;
• Income tax expense (or benefit) from continuing operations disaggregated between federal, state, and foreign; and
• Income taxes paid disaggregated between federal, state, and foreign.
Additional Disclosures for Public Entities
Public business entities would also be required to provide the following disclosure:
• The line items in the statement of financial position in which the unrecognized tax benefits are presented and the related amounts of such unrecognized tax benefits;
• The amount and explanation of the valuation allowance recognized and/or released during the reporting period;
• The total amount of unrecognized tax benefits that offsets the deferred tax assets for carryforwards.
In addition, among other changes, the amendments in the proposed ASU would 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.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Income Taxes -- FASB Discusses Disclosure Framework

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on January 23, 2019, and continued redeliberations of its July 2016 proposed ASU, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes. The FASB discussed external review comments on a draft of a revised proposed Update, including whether tax expense and taxes paid on foreign earnings that are imposed by the country of domicile of the entity should be classified as a foreign or domestic amount.

The FASB decided not to require that an entity disclose the amount of the transition tax liability resulting from the Tax Cuts and Jobs Act and the line item in the statement of financial position in which the liability is presented. The FASB also decided not to require that an entity disclose a description of a legally enforceable agreement with a government, including the duration of the agreement, the commitments made with the government under that agreement, and the amount of benefit that reduces or may reduce its income tax burden.

The FASB directed the staff to perform outreach on the operability and benefits of classifying tax expense and taxes paid on foreign earnings that are imposed by the country of domicile of the entity as a foreign or domestic amount.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 - FASB ASU No. 2018-05

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act (Act).
 
ASU 2018-05 adds the following guidance, among other things, to the FASB Accounting Standards Codification™ regarding the Act:
 
Question 1: If the accounting for certain income tax effects of the Act is not completed by the time a company issues its financial statements that include the reporting period in which the Act was enacted, what amounts should a company include in its financial statements for those income tax effects for which the accounting under Topic 740 is incomplete?
 
Answer 1: In a company's financial statements that include the reporting period in which the Act was enacted, a company must first reflect the income tax effects of the Act in which the accounting under Topic 740 is complete. These completed amounts would not be provisional amounts. The company would then also report provisional amounts for those specific income tax effects of the Act for which the accounting under Topic 740 will be incomplete but a reasonable estimate can be determined. For any specific income tax effects of the Act for which a reasonable estimate cannot be determined, the company would not report provisional amounts and would continue to apply Topic 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. For those income tax effects for which a company was not able to determine a reasonable estimate (such that no related provisional amount was reported for the reporting period in which the Act was enacted), the company would report provisional amounts in the first reporting period in which a reasonable estimate can be determined.
 
Question 2: If an entity accounts for certain income tax effects of the Act under a measurement period approach, what disclosures should be provided?
 
Answer 2: The staff believes an entity should include financial statement disclosures to provide information about the material financial reporting impacts of the Act for which the accounting under Topic 740 is incomplete, including:
  • Qualitative disclosures of the income tax effects of the Act for which the accounting is incomplete;
  • Disclosures of items reported as provisional amounts;
  • Disclosures of existing current or deferred tax amounts for which the income tax effects of the Act have not been completed;
  • The reason why the initial accounting is incomplete;
  • The additional information that is needed to be obtained, prepared, or analyzed in order to complete the accounting requirements under Topic 740;
  • The nature and amount of any measurement period adjustments recognized during the reporting period;
  • The effect of measurement period adjustments on the effective tax rate; and
  • When the accounting for the income tax effects of the Act has been completed.
ASU 2018-05 is effective upon inclusion in the FASB Codification.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Tax Cuts and Jobs Act - FASB Adds SEC Guidance to the Codification on the Tax Cuts and Jobs Act

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act (Act).
 
ASU 2018-05 adds the following guidance, among other things, to the FASB Accounting Standards Codification™ regarding the Act:
 
Question 1: If the accounting for certain income tax effects of the Act is not completed by the time a company issues its financial statements that include the reporting period in which the Act was enacted, what amounts should a company include in its financial statements for those income tax effects for which the accounting under Topic 740 is incomplete?
 
Answer 1: In a company's financial statements that include the reporting period in which the Act was enacted, a company must first reflect the income tax effects of the Act in which the accounting under Topic 740 is complete. These completed amounts would not be provisional amounts. The company would then also report provisional amounts for those specific income tax effects of the Act for which the accounting under Topic 740 will be incomplete but a reasonable estimate can be determined. For any specific income tax effects of the Act for which a reasonable estimate cannot be determined, the company would not report provisional amounts and would continue to apply Topic 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. For those income tax effects for which a company was not able to determine a reasonable estimate (such that no related provisional amount was reported for the reporting period in which the Act was enacted), the company would report provisional amounts in the first reporting period in which a reasonable estimate can be determined.
 
Question 2: If an entity accounts for certain income tax effects of the Act under a measurement period approach, what disclosures should be provided?
 
Answer 2: The staff believes an entity should include financial statement disclosures to provide information about the material financial reporting impacts of the Act for which the accounting under Topic 740 is incomplete, including:
  • Qualitative disclosures of the income tax effects of the Act for which the accounting is incomplete;
  • Disclosures of items reported as provisional amounts;
  • Disclosures of existing current or deferred tax amounts for which the income tax effects of the Act have not been completed;
  • The reason why the initial accounting is incomplete;
  • The additional information that is needed to be obtained, prepared, or analyzed in order to complete the accounting requirements under Topic 740;
  • The nature and amount of any measurement period adjustments recognized during the reporting period;
  • The effect of measurement period adjustments on the effective tax rate; and
  • When the accounting for the income tax effects of the Act has been completed.
ASU 2018-05 is effective upon inclusion in the FASB Codification.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Income Taxes - FASB Discusses Financial Reporting for Tax Reform

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on January 10, 2018, and decided to add a project to its agenda on the reclassification of certain tax effects from accumulated other comprehensive income to retained earnings. The FASB reached a number of decisions on this matter, including to:

  • Require a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from the newly enacted corporate tax rate in the Tax Cuts and Jobs Act.
  • Add a broader project to its research agenda on the accounting for subsequent effects of changes in deferred tax liabilities and assets that were originally charged or credited directly to equity (“backwards tracing”).
  • Require the application of the reclassification to each period in which the effect of the Tax Cuts and Jobs Act (or portion thereof) is recorded. That requirement would be applied retrospectively to the date of enactment if the forthcoming accounting guidance is not adopted early.
  • Require certain specified transition disclosures.

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory - FASB ASU 2016-16

Summary - These amendments require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory.
 
The amendments do not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. 

Effective - Effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities in the first interim period if an entity issues interim financial statements.
 
The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes - FASB ASU 2015-17

Summary - The amendments in ASU 2015-17 eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent.

Effective - Effective for public business entities for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.                           

The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Update No. 2016 -16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

Summary - These amendments require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory.
 
The amendments do not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory.
 
Effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities in the first interim period if an entity issues interim financial statements.
 
The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Update No. 2016 -16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

Summary -  The FASB has issued Accounting Standards Update (ASU) No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP.

The amendments require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included in the scope of the amendments are intellectual property and property, plant, and equipment.
 
The amendments do not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory.
 
The amendments align the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards. IAS 12, Income Taxes, requires recognition of current and deferred income taxes resulting from an intra-entity transfer of any asset (including inventory) when the transfer occurs.
 
The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities in the first interim period if an entity issues interim financial statements.
 
The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed Accounting Standards Update 2016-270 - Income Taxes (Topic 740) - Disclosure Framework - Changes to the Disclosure Requirements for Income Taxes 

Summary -  The FASB has issued a proposed Accounting Standards Update (ASU), Income Taxes (Topic 740): Disclosure Framework - Changes to the Disclosure Requirements for Income Taxes. The proposed amendments would modify the current disclosure requirements for income taxes.
 
The following additional disclosures would be required by Topic 740 for all entities on the basis of the proposed FASB Concepts Statement, Conceptual Framework for Financial Reporting - Chapter 8: Notes to Financial Statements:
  1. Description of an enacted change in tax law that is probable to have an effect on the reporting entity in a future period;
  2. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign;
  3. Income tax expense (or benefit) from continuing operations disaggregated between domestic and foreign;
  4. Income taxes paid disaggregated between domestic and foreign, and the amount of income taxes paid to any country that is significant to total income taxes paid;
  5. An explanation of circumstances that caused a change in assertion about the indefinite reinvestment of undistributed foreign earnings and the corresponding amount of those earnings; and
  6. The aggregate of cash, cash equivalents, and marketable securities held by foreign subsidiaries.
The following disclosures would be required for public business entities by Topic 740 on the basis of the proposed Concepts Statement:
  1. Within the reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period, settlements using existing deferred tax assets separate from those that have been or will be settled in cash.
  2. The line items in the statement of financial position in which the unrecognized tax benefits are presented and the related amounts of such unrecognized tax benefits. If the unrecognized tax benefits are not presented in the statement of financial position, those amounts should be disclosed separately.
  3. The amount and explanation of the valuation allowance recognized and/or released during the reporting period.
  4. The total amount of unrecognized tax benefits that offsets the deferred tax assets for carryforwards.
The proposed amendments would modify the existing rate reconciliation requirement for public business entities to be consistent with U.S. Securities and Exchange Commission Regulation S-X 210.4-08(h), Rules of General Application - General Notes to Financial Statements: Income Tax Expense. That regulation requires separate disclosure for any reconciling item that amounts to more than 5 percent of the amount computed by multiplying the income before tax by the applicable statutory federal income tax rate. The proposed amendments would further modify the requirement to explain the changes in those reconciling items from year to year.

For more information, click  here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes 

Summary -  The FASB has issued ASU No. 2015-17,  Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,  which changes how deferred taxes are classified on organizations' balance sheets.

The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent.

The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, not-for-profit organizations, and employee benefit plans, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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