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q123 Qaw Slides Final
q123 Qaw Slides Final
accounting webcast
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Highlights
March 2022 - Revised project objective: To improve the transparency and decision usefulness of income tax disclosures - Revised the project
scope to primarily focus on disclosures related to the rate reconciliation and income taxes paid information
November 2022 - Board decisions
• Income taxes paid
– All entities to disclose year-to-date income taxes paid disaggregated by federal, state and foreign taxes on both and interim and
annual basis
– All entities to disclose income taxes paid disaggregated by individual jurisdiction based on a quantitative threshold of 5 pe rcent of total
income taxes paid on an annual basis only
• Rate reconciliation
– PBEs to disclose rate reconciliation information by 8 specific categories, at a minimum, with accompanying qualitative disclo sures on an
annual basis, using both dollars and percentages
– PBEs to separately disclose reconciling items by nature, on the basis of a quantitative threshold of 5 percent, within certain categories and
to separately disclose reconciling items by nature and by jurisdiction with the foreign tax effect category.
– Non PBEs provide a qualitative disclosure about specific categories and individual jurisdictions that result in a significant difference
between the statutory tax rate and the effective tax rate
• ED / Comment period
– ED issued on March 15, 2023
– Comment period of 75 days, ends May 30, 2023
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International tax developments - OECD Pillar Two update
Establishes a global framework of minimum taxation through use of an effective tax rate (ETR)
Taxes paid on income or profits, as well as any taxes imposed in lieu of an income tax, are included in the ETR
Financial accounts of the parent entity are used to calculate the tax base and ETR at an entity level
An incremental tax liability arises when the ETR in a jurisdiction is below the agreed minimum rate
The Global Anti-Base Erosion (“GloBE”) Rules apply a system of top-up taxes – that is, an Income Inclusion Rule (IIR) and an
Undertaxed Payment Rule (UTPR) – that brings the total amount of taxes paid on a multinational enterprise’s excess profit in
a jurisdiction up to the minimum rate of 15%.
• New corporate alternative minimum tax of 15% (CAMT) • Excise Tax on share buybacks
– equal to the excess of 15% of the applicable corporation’s – 1% excise tax on the net value of certain stock that
adjusted financial statement income over the CAMT foreign corporations repurchase during the tax year
tax credit for the tax year.
– applies to repurchases of stock after December 31, 2022
– CAMT is only due if a taxpayer’s tentative minimum tax
exceeds its regular tax plus base erosion and anti-abuse tax
(BEAT) • Climate, energy, and advanced manufacturing investment
incentives
– effective for tax years beginning after December 31, 2022
– certain incentives may be in the scope of ASC 740
– incentives outside the scope of ASC 740 (e.g., credits with
direct-pay options) may be akin to a government grant
• Buyer establishes a program with a finance provider or intermediary that typically works as follows:
Suppliers Buyer
Step 2: Confirms
Step 3: May make early the amount and
payment (typically at a validity of invoices
discounted amount at the
request of the supplier)
Section 11.3.1.5 of our Financial Statement Presentation Guide provides a full list of indicators to consider. Also check out our recent podcast.
See Section 11.3.1.5 of our Financial Statement Presentation Guide for further details and check out our recent podcast.
For more information, see Effective dates of FASB standards for public companies
For more information, see Effective dates of FASB standards for nonpublic companies
Background:
• The FASB received feedback from investors during its agenda consultation that further disaggregation of expenses should be a high priority.
• In February 2022, the FASB revised the objective of its existing “financial performance reporting” project to focus on improving the decision
usefulness of business entities’ income statements through the disaggregation of certain expense captions.
Current status:
• The FASB has tentatively decided to propose new footnote disclosures that include:
1. Disaggregation of each expense line item presented in the income statement (e.g., cost of sales, SG&A, R&D) based on the following
categories: (1) employee compensation, (2) inventory expenses, (3) depreciation of fixed assets, and (4) amortization of intangibles.
Qualitative description of remaining costs.
2. Disclosure of costs incurred and capitalized into inventory disaggregated by: (1) purchases of inventory, (2) employee compensation, (3)
depreciation of fixed assets, and (4) amortization of intangibles. Qualitative description of remaining costs.
3. Disclosure of “selling expenses” and description of the company’s policy for determining the type of expenses included within “selling
expenses.”
• An ED could be issued as soon as mid-2023.
New disclosure requirement: Significant segment expenses that are 1) regularly provided to the CODM and 2) used in the measure of
1 segment profit or loss
2 Creates an “other segment items” category of segment revenue less significant segment expenses less segment measure of profit/loss
Allows companies to report more than one measure of segment profit or loss, at least one measure should be the one most consistent
5 with GAAP amounts
5. Revenue Recognition 6. Fair Value Measurement 7. Business Combinations 8. Inventory and Cost of
Sales
For more information on comment letter trends, check out our podcast miniseries on SEC comment letters in our Podcast library and our
SEC comment letter trends pages
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