Comment to FASB on Prop. Accounting Standard Update, Topic 740

The American Bankers Association (ABA) welcomes the opportunity to comment on Proposed Accounting Standards Update – Income Taxes (Topic 740) Improvements to Income Tax Disclosures (the Exposure Draft). Representing both preparers and users of financial statements, we appreciate the Board’s continuing efforts to improve the effectiveness of disclosure requirements. We support the general objective of the Exposure Draft. However, while existing disclosure requirements may result in some diversity in reporting, this diversity reflects the complexity inherent in reporting income taxes across various sizes and types of industries over a variety of taxing jurisdictions. As such, ABA believes the existing disclosure requirements of Accounting Standards Codification Topic (ASC) 740 generally reflect a fair and faithful balance of tax disclosures needed to provide decision-useful information for users of general purpose financial statements.

We appreciate that a general understanding of income tax risks is important to users of the financial statements. However, the significant complexity of domestic and international tax rules makes it very difficult to provide concise and decision-useful disclosures. We believe that the proposed expansion of the disclosures will not significantly improve the financial statement user’s assessment of the prospects for future cash flows and, in fact, may often lead to confusion and incorrect conclusions.

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