News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
Companies will have to be a lot more open about their tax bills after the Financial Accounting Standards Board (FASB) passed a new income tax disclosure standard after years of controversy.
Under the new standard, public and private companies will now have to identify and catalog income taxes paid at the state and federal levels, as well as foreign income tax payments, in their annual financial reports. Companies will also have to report the enactment of new tax laws and the effect of cross-border tax laws.
Currently, companies are only required to disclose the total cash tax payments they make, their effective tax rates, and tax benefits or expenses.
The new standard was first proposed in 2016 but businesses resisted the changes for years, claiming the proposed standard was too confusing for investors and could potentially expose business secrets. However, FASB said that investor demand drove the new standard and that it will increase transparency for investors.
“Time and time again investors have made it clear that they need a closer look into the tax practices of the companies in their portfolios,” Ian Gary, executive director of the Financial Accountability & Corporate Transparency (FACT) Coalition, said in a statement. “Now, after years of deliberations and revisions, FASB is finally delivering some of these much-needed reforms for investors and the public.”
The FASB board unanimously approved the new standard on Wednesday by a 7–0 vote, the Wall Street Journal reported. The new standard will be in effect for public companies in 2025, and private companies will fall under the disclosure rules in 2026. The new rule is expected to be finalized by the end of the year.