Income tax disclosure

Tax accounting insights Dec 16, 2013

Numerous income tax accounting matters require the use of estimates, judgments, and other subjective information that can obscure the presentation in the financial statement accounts. Clarifying disclosures can enable users to gain a better understanding of the reporting entity’s income tax environment.

Overview

Users of financial statements continue to emphasize the importance of informative, decision useful disclosures. This focus often extends to the reporting of income taxes, a material component of most financial statements. Tax laws can be difficult to understand due to their complexity, compounded by the multitude of taxing jurisdictions throughout the world. Connecting the effects of those laws with financial accounting principles adds to the challenge.

Numerous income tax accounting matters require the use of estimates, judgments, and other subjective information that can obscure the presentation in the financial statement accounts. Clarifying disclosures can enable users to gain a better understanding of the reporting entity’s income tax environment.

Today’s financial reporting users represent a spectrum of stakeholders including investors, lenders, regulators, accounting standard setters, analysts, researchers, and legislative or public policy-making bodies around the world. The business environment and user expectations have evolved such that companies are encouraged to communicate more effectively about their income tax profile.

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Richard Levin
US Tax Accounting Services Leader
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Jennifer Spang
Partner, National Professional Services Group
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