This Section provides guidance on the financial statement disclosure requirements relating to
income taxes applicable to all entities.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 Nothing in this Subtopic is intended to discourage an entity from reporting additional information specific to its income tax rate reconciliation or income taxes paid to further an understanding of the entity and the related disclosures. An entity's
temporary difference and carryforward information requires additional disclosure. The additional disclosure differs for public and nonpublic entities.
A public entity shall disclose the approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets (before allocation of valuation allowances). (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 | Editor's Note: The content of paragraph 740-10-50-6 will be amended upon transition, together with a change in the heading noted below. |
| ∙ > Public Business Entities |
A public business entity shall disclose the approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets (before allocation of valuation allowances). See paragraph
740-10-50-16 for disclosure requirements applicable to a public entity that is not subject to income taxes.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 See paragraph
740-10-50-16 for disclosure requirements applicable to a public
business entity that is not subject to income taxes.
A nonpublic entity shall disclose the types of significant temporary differences and carryforwards but may omit disclosure of the tax effects of each type. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 | Editor's Note: The content of paragraph 740-10-50-8 will be amended upon transition, together with a change in the heading noted below. |
| ∙ > Entities Other Than Public Business Entities |
An entity other than a public business entity shall disclose the types of significant temporary differences and carryforwards but may omit disclosure of the tax effects of each type. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign shall be disclosed for each annual reporting period. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign shall be disclosed for each annual reporting period. Income taxes on foreign earnings that are imposed by the jurisdiction of domicile shall be included in the amount for that jurisdiction of domicile (that is, the jurisdiction imposing the tax). The reported amount of income tax expense may differ from an expected amount based on statutory rates. The following guidance establishes the disclosure requirements for such situations and differs for public and nonpublic entities.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 | Editor's Note: The content of paragraph 740-10-50-11 will be amended upon transition, together with a change in the heading noted below. |
| > Rate Reconciliation between Income Tax Expense (or Benefit) and Statutory Expectations |
The reported amount of income tax expense
(or benefit) may differ from an expected amount based on statutory
tax rates. The following guidance establishes the disclosure requirements for such situations and differs for public
business entities and entities
other than public business entities. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 The objective of these disclosure requirements is for an entity, particularly an entity operating in multiple jurisdictions, to disclose sufficient information to enable users of financial statements to understand the nature and magnitude of factors contributing to the difference between the effective tax rate and the statutory tax rate. A public entity shall disclose a reconciliation using percentages or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations. The statutory tax rates shall be the regular tax rates if there are alternative tax systems. The estimated amount and the nature of each significant reconciling item shall be disclosed.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 | Editor's Note: The content of paragraph 740-10-50-12 will be amended upon transition, together with a change in the heading noted below. |
| ∙ > Public Business Entities |
A public business entity shall disclose a reconciliation for each annual reporting period, in accordance with paragraphs , between the amount of reported income tax expense (or benefit) from continuing operations and the amount computed by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile. In circumstances in which a public business entity, as the parent entity, is not domiciled in the United States, the federal (national) income tax rate in that entity’s jurisdiction (country) of domicile shall normally be used in the reconciliation, and different rates shall not be used for subsidiaries or segments of the public business entity. When the rate used by a public business entity is other than the United States federal corporate income tax rate, the public business entity shall disclose the rate used and the basis for using that rate. The statutory tax rates shall be the regular tax rates if there are alternative tax systems. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 For each annual reporting period, a public business entity shall disclose a tabular reconciliation, using both percentages and reporting currency amounts, according to the following requirements: - a
The following specific categories shall be disclosed:
- 1
State and local income tax, net of federal (national) income tax effect
- 2
Foreign tax effects
- 3
Effect of changes in tax laws or rates enacted in the current period
- 4
Effect of cross-border tax laws
- 5
Tax credits
- 6
Changes in valuation allowances
- 7
Nontaxable or nondeductible items
- 8
Changes in unrecognized tax benefits.
- b
Separate disclosure shall be required for any reconciling item listed below in which the effect of the reconciling item is equal to or greater than 5 percent of the amount computed by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile. When disaggregating the following reconciling items by nature, an entity should consider the reconciling item’s fundamental or essential characteristics, such as the event that caused the reconciling item and the activity with which the reconciling item is associated. Reconciling items shall be presented on a gross basis unless specific guidance in (c) permits net presentation with a related reconciling item.
- 1
If the reconciling item is within the effect of cross-border tax laws, tax credits, or nontaxable or nondeductible items categories, it shall be disaggregated by nature.
- 2
If the reconciling item is within the foreign tax effects category, it shall be disaggregated by jurisdiction (country) and by nature, except for reconciling items related to changes in unrecognized tax benefits discussed in (c). If a foreign jurisdiction meets the 5 percent threshold, it shall be separately disclosed as a reconciling item. Within any foreign jurisdiction (regardless of whether it meets the 5 percent threshold), the reconciling item shall be separately disclosed by nature if its gross amount (positive or negative) meets the 5 percent threshold.
- 3
If the reconciling item is not within any of the categories listed in (a), it shall be disaggregated by nature.
- c
For the purpose of categorizing and presenting reconciling items:
- 1
Except for reconciling items related to changes in unrecognized tax benefits discussed in (c)(2), the state and local income tax category reflects income taxes imposed at the state or local level within the jurisdiction (country) of domicile, the foreign tax effects category reflects income taxes imposed by foreign jurisdictions, and the remaining categories listed in (a) reflect federal (national) income taxes imposed by the jurisdiction (country) of domicile.
- 2
For reconciling items related to changes in unrecognized tax benefits:
- i
Reconciling items resulting from changes in judgment related to tax positions taken in prior annual reporting periods (such as subsequent recognition, derecognition, and change in measurement of unrecognized tax benefits) are reflected in the changes in unrecognized tax benefits category.
- ii
When an unrecognized tax benefit is recorded in the current annual reporting period for a tax position taken or expected to be taken in the same reporting period, the unrecognized tax benefit and its related tax position may be presented on a net basis in the category where the tax position is presented.
- iii
Reconciling items presented in the changes in unrecognized tax benefits category may be disclosed on an aggregated basis for all jurisdictions.
- 3
The effect of cross-border tax laws category reflects the effect of incremental income taxes imposed by the jurisdiction (country) of domicile on income earned in foreign jurisdictions. When the jurisdiction (country) of domicile taxes cross-border income but also provides a tax credit on the same income during the same reporting period, the tax effect of both the cross-border tax and its related tax credit may be presented on a net basis in the effect of cross-border tax laws category. For example, the tax effect related to the global intangible low-taxed income and its related foreign tax credits may be presented on a net basis as one reconciling item in the effect of cross-border tax laws category.
- 4
The effect of changes in tax laws or rates enacted in the current period category reflects the cumulative tax effects of a change in enacted tax laws or rates on current or deferred tax assets and liabilities at the date of enactment.
See paragraph 740-10-55-231 for an illustration of a tabular rate reconciliation disclosure. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 A public business entity shall provide a qualitative description of the states and local jurisdictions that make up the majority (greater than 50 percent) of the effect of the state and local income tax category. For the purpose of identifying the states and local jurisdictions that make up the majority of the effect, a public business entity shall begin with the state or local jurisdiction that has the largest effect and in descending order add states or local jurisdictions with the next largest effect until the aggregated effect is greater than 50 percent. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 A public business entity shall provide an explanation, if not otherwise evident, of individual reconciling items required by paragraph 740-10-50-12A, such as the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items. A nonpublic entity shall disclose the nature of significant reconciling items but may omit a numerical reconciliation.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 | Editor's Note: The content of paragraph 740-10-50-13 will be amended upon transition, together with a change in the heading noted below. |
| ∙ > Entities Other Than Public Business Entities |
An entity other than a public business entity shall qualitatively disclose the nature and effect of specific categories of reconciling items listed in paragraph 740-10-50-12A(a) and individual jurisdictions that result in a significant difference between the statutory tax rate and the effective tax rate, but a numerical reconciliation is not required. See paragraphs for an illustration of a qualitative disclosure of rate reconciling items. If not otherwise evident from the disclosures required by this Section, all entities shall disclose the nature and effect of any other significant matters affecting comparability of information for all periods presented.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 If not otherwise evident from the disclosures required by this Section, an entity shall disclose the nature and effect of any other significant matters affecting comparability of information for all periods presented. All entities shall disclose all of the following at the end of each annual reporting period presented: - a
- b
- c
The total amounts of interest and penalties recognized in the statement of operations and the total amounts of interest and penalties recognized in the statement of financial position
- d
For positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date:
- 1
The nature of the uncertainty
- 2
The nature of the event that could occur in the next 12 months that would cause the change
- 3
An estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made.
- e
A description of tax years that remain subject to examination by major tax jurisdictions.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 An entity shall disclose the following at the end of each annual reporting period presented: - a
- b
- c
The total amounts of interest and penalties recognized in the statement of operations and the total amounts of interest and penalties recognized in the statement of financial position
- d
- e
A description of tax years that remain subject to examination by major tax jurisdictions.
Public entities shall disclose both of the following at the end of each annual reporting period presented: - a
A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period, which shall include at a minimum:
- 1
The gross amounts of the increases and decreases in unrecognized tax benefits as a result of tax positions taken during a prior period
- 2
The gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during the current period
- 3
The amounts of decreases in the unrecognized tax benefits relating to settlements with taxing authorities
- 4
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations.
- b
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate.
See Example 30 (paragraph
740-10-55-217) for an illustration of disclosures about uncertainty in income taxes.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 A public business entity shall disclose both of the following at the end of each annual reporting period presented: - a
A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period, which shall include at a minimum:
- 1
The gross amounts of the increases and decreases in unrecognized tax benefits as a result of tax positions taken during a prior period
- 2
The gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during the current period
- 3
The amounts of decreases in the unrecognized tax benefits relating to settlements with taxing authorities
- 4
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations.
- b
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate.
See Example 30 (paragraph
740-10-55-217) for an illustration of disclosures about uncertainty in income taxes.
A public entity that is not subject to income taxes because its income is taxed directly to its owners shall disclose that fact and the net difference between the tax bases and the reported amounts of the entity's assets and liabilities.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 | Editor's Note: The content of paragraph 740-10-50-16 will be amended upon transition, together with the change in the heading noted below. |
| > Public Business Entities Not Subject to Income Taxes |
A public business entity that is not subject to income taxes because its income is taxed directly to its owners shall disclose that fact and the net difference between the tax bases and the reported amounts of the entity's assets and liabilities. Acceptable alternative policy choices available to an entity require disclosure as follows in paragraphs
.
Paragraph
740-10-25-46 identifies the deferral method and the flow-through method as acceptable methods of accounting for investment tax credits.
Whichever method of accounting for the investment credit is adopted, it is essential that full disclosure be made of the method followed and amounts involved, when material. In addition to disclosures required by this Subtopic, disclosures regarding estimates meeting certain criteria are established in paragraph
275-10-50-8 for nongovernmental entities. See Example 31 (paragraph
740-10-55-218) for an illustration of disclosure relating to the realizability of a deferred tax asset under the requirements of Topic
275.
(P) December 16, 2024; (N) December 16, 2025
740-10-65-9 For each annual reporting period, all entities shall disclose the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign. (P) December 16, 2024; (N) December 16, 2025
740-10-65-9 For each annual reporting period, all entities shall disclose the amount of income taxes paid (net of refunds received) to each individual jurisdiction in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received).