PCC Slams Income Tax Disclosure Plan
At its December 4th meeting, the Private Company Council (“PCC”) criticized the Financial Accounting Standards Board’s (“FASB”) proposal to add effective disclosures to Accounting Standards Codification 740-10-50, Income Taxes. The plan would require additional details about income taxes to be disclosed in the footnotes of a company’s financial statements. Members of the FASB’s advisory group, however, said that the extra details would be a burden on private companies and worthless to most financial statement users.
In particular, PCC members slammed the requirement for companies to disclose the reconciliation of its effective tax rate and statutory rate. While U.S. GAAP requires public companies to disclose this information, the PCC did not understand why the FASB proposed that private companies follow suit.
In defense of the proposal, FASB Chairman Russell Golden referenced a Financial Accounting Foundation review that determined financial statement disclosures about income taxes required more details. Golden said the review specifically calls out private businesses and recent reports of multinational companies shifting their profits abroad to avoid paying U.S. taxes caused the board to explore income tax disclosures.