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By Denise Lugo
June 8 — A proposal in July to change the disclosure requirements for income taxes would apply to some private community banks that fit the definition of a public business entity.
Community banks that are required to file their annual audit financial statements with the Federal Deposit Insurance Corp. and have securities not subject to contractual restrictions on transfer should be aware of the forthcoming proposal, the Financial Accounting Standards Board said June 8.
The forthcoming proposal would require community banks to make certain existing and potential new disclosures on income taxes relevant to public companies, such as a rate reconciliation and a roll forward to a future period on unrecognized tax benefits, FASB said.
The disclosures won't be costly to such banks because some already make public entity disclosures, the discussions indicated. They would, however, provide transparency to financial statement users about the financial health of such entities.
The disclosures won't generally apply to private companies because the tax disclosures required of them are adequate, and further detailed disclosures wouldn't typically be used, FASB said.
Furthermore, private companies don't have the in-house expertise to prepare disclosures on income taxes. Therefore preparation of those disclosures is outsourced. Additional disclosures would lead to ongoing cost concerns, the discussions indicated.
FASB also decided the disclosures shouldn't apply to not-for-profit entities and employee benefit plans.
The topic is part of FASB's broader disclosure framework project, which aims to improve the effectiveness of disclosures in the notes to financial statements.
The focus of this part of the project is both to test concepts for disclosures and improve existing disclosures in ASC 740, Income Taxes. The board June 8 also agreed to propose that companies:
FASB will begin drafting the proposal, which will be issued for a 75-day comment period, which ends Sept. 30.
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