Kroeker: FASB Weighs Changes to Tax-Related Disclosures

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By Steven Marcy

March 14 — Unremitted foreign earnings and unrecognized tax benefits are two income tax areas that the Financial Accounting Standards Board is examining for possible changes in its disclosure requirements, board Vice Chairman James Kroeker said.

The impetus for the attention to unremitted foreign earnings comes solely from the urging of investors who want more information, and not “as some type of political statement,” Kroeker said March 14 at a Tax Executives Institute Inc. conference.

In explaining the possible initiative, Kroeker acknowledged that inversions and the sheltering of income in foreign jurisdictions are major political issues.

Tax Implications

Kroeker noted that potential tax implications traditionally haven't been one of FASB's primary concerns when it develops accounting standard changes.

The FASB examination of income-tax disclosures is “not about tax structures, or tax planning or how an entity chooses to best conduct its operations and its fiduciary responsibility to it shareholders,” he said.

Users of financial statements wonder “whether they have a handle on” tax situations at individual entities, Kroeker said in explaining why the board is examining disclosures of unremitted foreign earnings.

Investors have been concerned about entities' cash flows within tax jurisdictions and the ability of an entity to remit dividends back to the parent organization from foreign tax jurisdictions, Kroeker said.

‘Bottoms-Up Approach.'

Within FASB's overall disclosure project, the requests for better information about companies' tax positions has led the board to consider a “bottoms-up approach” to what is needed for tax situation disclosures, Kroeker said.

Such an approach would cover unremitted foreign earnings by jurisdiction if a particular jurisdiction amounts to more than 10 percent of total unremitted foreign earnings, Kroeker said. It would also cover the amount of taxes paid domestically versus taxes paid in a foreign jurisdiction if payment in that jurisdiction is “significant,” he said. “That's the type of thing we're looking at.”

FASB also is considering a less comprehensive and detailed “top down” approach to see if it could provide adequate tax situation disclosure at lower complexity and cost to companies, Kroeker said.

Unrecognized Tax Benefits

For unrecognized tax benefits, Kroeker said FASB isn't contemplating “significant change” in any disclosure information.

FASB is trying to figure out how, in a set of audited financial statements, companies can disclose “any potential change that is reasonably possible” in their unrecognized tax benefits over an upcoming 12-month period, he said. “I know disclosure committees have struggled with this.”

However, this disclosure wouldn't involve forward-looking estimates, Kroeker said. Current rules on tax disclosures do have forward projections, “and this is one reason why we're proposing to eliminate it,” he said.

Forward-looking projections of tax positions are more suitable for inclusion in the management discussion and analysis (MD&A) of the financial statement, he said.

FASB also is contemplating new disclosures surrounding the implications for a company of any changes in tax laws.

To contact the reporter on this story: Steven Marcy in Washington at

To contact the editor responsible for this story: Ali Sartipzadeh at

For More Information

FASB's disclosure framework information, including income tax issues, is at

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