Tax Disclosure Framework

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INTRODUCTION

This research project will analyze the recent changes in the disclosure requirements for income taxes. On July 26, 2016 the Financial Accounting Standards Board (FASB) published for comment a proposed Accounting Standards Update (ASU) on Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes. The FASB had received 52 comment letters by the due date of September 30, 2016. The Board issued the amendments in the proposed Update on Topic 740 as part of the disclosure framework project. The new ASU would change, add, and cancel previous income tax accounting disclosure standards. The new amendments would include requirements for all entities (public and private) to disclose certain
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They also would have to disclose the line items in the financial statement in which the UTBs benefits are presented and the related amounts of the benefits. Public business entities would also be required to disclose the amount of, and explanation for, a valuation allowance recognized or released during the reporting period.
Furthermore, the proposed ASU will impact all companies that report their financial statements under US GAAP. Some of the disclosure requirements are already part of the current Securities and Exchange Commission (SEC) disclosure requirements, but some disclosure requirements will reveal new information about reporting entities. PricewaterhouseCoopers (PwC) (Spang and Suplee, 2016) warns that “companies should consider how the additional disclosures may be utilized and interpreted by various stakeholders. In addition, compiling the necessary information, particularly for multinational corporations, may be challenging and may require updates to systems, processes, and controls”. Therefore, the implementation of the new standards on the early stages may require additional financial resources from the business entities.
The purpose of this work is to identify strengths and weaknesses of the proposed ASU and whether the new proposed disclosure requirements do
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