The FASB suggested the update in its Invitation to Comment issued in June 2021 as part of its agenda consultation process to prioritize its projects for the next five years. But any FASB changes would have to take note of foreign tax payment and reporting changes currently being considered by Congress.
Lawmakers on both the U.S. House Committee on Ways and Means and the U.S. Senate Committee on Finance have proposed changes to the global intangible low-taxed income (GILTI) tax and foreign-derived intangible income regimes. The current provisions were established as part of the Tax Cuts and Jobs Act of 2017, which broadly reduced corporate taxes.
In comments to the FASB, groups such as the California Public Employees’ Retirement System, the Council of Institutional Investors, and the Financial Accountability and Corporate Transparency (FACT) Coalition called for increased tax transparency in line with public country-by-country tax reporting information. The FACT Coalition, composed of unions and other trade groups and associations, recommended the FASB adjust its income tax accounting standard because congressional changes to GILTI “may also result in a global minimum tax regime that applies on a jurisdiction-by-jurisdiction basis, only increasing the relevance of related information to investors.”
Companies wrote to the FASB opposing more detailed reporting of foreign country income. In a typical example, Mary-Lee Stillwell, vice president of accounting and external reporting for Verizon Communications, said that Verizon supports the FASB’s ongoing initiative to reduce complexity in accounting standards, particularly in continuing to simplify the accounting for income taxes. She added, “However, we believe that the additional disclosures suggested by investors in the Invitation to Comment would not achieve this goal. The proposed additional disclosure would not provide decision useful information to investors, would likely result in additional confusion… and would result in additional burden on financial statement preparers.”
The U.S. House of Representatives has already passed a bill called the Disclosure of Tax Havens and Offshoring Act, which would require large corporations to disclose basic information on each of their subsidiaries and country-by-country financial information that sums together all of their subsidiaries in each country, including profits, taxes, employees, and tangible assets. The Senate hasn’t yet acted on that bill.