By Colin M. Hannifin, CPA, Business Assurance & Advisory Services Senior Manager
FASB announces new accounting standard
On December 14, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740). The intent of the standard is improve income tax disclosures to provide more useful insight to the users of the financial statements.
Impact on public entities
Under the new standard, public business entities are required to disclose a tabular income tax rate reconciliation. The rate reconciliation should explain any difference between the statutory and effective tax rates. Certain specific categories, such as state and local income tax, foreign tax effects, effect of changes in tax laws or rates, changes in valuation allowance, and more, are required to be disclosed.
Impact on non-public entities
For non-public entities, there are new qualitative disclosures required regarding reconciling items and individual jurisdictions that result in a significant difference between the statutory and effect tax rates. However, a quantitative rate reconciliation is not required.
What applies to all entities?
The new standard also requires enhanced disclosures about income taxes paid for all entities, including the amount of income taxes paid (net of refunds received), disaggregated by federal, state, and foreign taxes. In addition, entities will have to disaggregate income taxes paid (net of refunds received) for any individual jurisdiction that comprises more than 5% of total income taxes paid (net of refunds received).
The new standard will be effective for public business entities for annual periods beginning after December 15, 2024. For all other entities, the amendments will be effective for periods beginning after December 15, 2025. The changes should be applied on a prospective basis, though retrospective application is permitted.
Questions on how the new standards will impact your business? Contact your Keiter Opportunity Advisor or 804.747.0000 | Email.
About the Author
Colin M. Hannifin, CPA, Business Assurance & Advisory Services Senior Manager
Colin is a Business Assurance & Advisory Services Senior Manager at Keiter. He has significant experience in public accounting for both the not-for-profit and private sectors. Colin’s clients rely on him for sound advice and insights on accounting regulations and changes that may impact their business.
More Insights from Colin M. HannifinThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
