New FASB Tax Disclosures Are Hitting Corporate Tax Teams Right Now. Here's What Changed.

FASB's new income tax disclosure rules are hitting corporate tax teams right now — during busy season. ASU 2023-09 took effect for 2025 financial statements filed in 2026, which means if you work with public companies, your clients are dealing with this today. And it's not just more disclosures — it's a data and systems overhaul that's exposing gaps in how companies track and report taxes.

What ASU 2023-09 Requires

The old effective tax rate reconciliation? Gone. The new one requires disaggregation across eight specific categories, with both percentages and dollar amounts. That includes state and local taxes, foreign tax effects, changes in tax laws, cross-border tax rules, and tax credits.

But here's the real work: any reconciling item that's 5% or more of the statutory rate calculation must be broken out separately. For foreign taxes, that disaggregation goes even deeper — by both jurisdiction and nature.

Translation: if your client operates in 15 countries, they're now disclosing granular foreign tax details for each one. If they have material state tax exposure in multiple states, they're listing those too.

The Cash Tax Payment Breakout

The new rule also requires companies to disclose income taxes paid (net of refunds) by federal, state, and foreign jurisdictions. And if any single jurisdiction — country, state, or local — represents 5% or more of total taxes paid, it gets its own line item.

That sounds simple until you realize most companies weren't tracking cash tax payments at that level of detail. They knew total taxes paid. They didn't necessarily know the exact breakdown by individual U.S. state or foreign country in a format ready for public disclosure.

The Data Problem (and the Bolt-On Tool Solution)

Michael Williams, BDO's national ASC 740 practice leader, told Thomson Reuters that data and technology are the biggest challenges companies are facing. "A lot of companies build their own kind of bolt-on tool," he said — meaning they're cobbling together custom solutions because their existing systems can't deliver the required granularity.

For decentralized companies or those not on a unified ERP system, the problem's worse. The data wasn't being captured at the level FASB now requires. Companies are retrofitting processes mid-busy season to comply.

And that introduces financial statement risk. If companies haven't properly resourced this work — whether that's headcount, tech, or consultants — they're scrambling to meet the disclosure requirements without compromising accuracy.

Proactive Planning Is the Difference

Williams' advice: get out in front of it early. That means assessing data gaps, process constraints, and resource needs before the filing deadline looms. It also means securing buy-in from leadership.

"Companies are going to need business/leadership support to make those types of investments," Williams said. The C-suite and board need to understand why the tax department suddenly needs budget for automation, third-party tools, or additional FTEs. This isn't optional — it's what compliance now costs.

The Interpretation Challenge

The standard leaves room for judgment, particularly around materiality. What counts as "majority of the effect" for state and local taxes? How do you determine whether a reconciling item is material enough to break out separately? Companies are making those calls themselves, and there's no uniform answer yet.

"There's still a lot left to interpretation," Williams noted. That means companies filing early are setting precedents, and later filers will be watching to see what the SEC accepts.

The Timing Problem: Pillar Two and Public CbCR

This isn't happening in a vacuum. ASU 2023-09 lands at the same time multinational companies are implementing the OECD's Pillar Two global minimum tax and complying with public Country-by-Country Reporting mandates in the EU and Australia.

Matt Williams, a principal in BDO's Specialized Tax Services group, told Thomson Reuters that public CbCR introduces "disclosure of sensitive financial data" and "additional scrutiny from stakeholders" who may not fully understand the context behind the numbers. Pillar Two adds another layer: constant tracking of legislative changes across every jurisdiction where a company operates, often with local deviations from the OECD model.

The result? Corporate tax departments are managing three overlapping transparency initiatives simultaneously — FASB disclosures, Pillar Two compliance, and public CbCR — all of which require more granular data than most systems were designed to deliver.

The Co-Sourcing Shift

Williams noted that companies are increasingly turning to co-sourcing or outsourcing models to handle the complexity. "Given constraints on resources, budget, and the complexity of the business," he said, it's the most common approach.

That's a shift. Tax departments that historically handled provisions in-house are now bringing in third-party support — not just for overflow work, but for core compliance tied to ASU 2023-09 and global tax transparency mandates.

What This Means for CPAs

If you advise public companies or work in corporate tax, ASU 2023-09 is live right now. The first wave of 2025 financials filed in 2026 will set the tone for how the market interprets the standard. That means your clients are either already scrambling to comply or about to realize they're not ready.

The good news? The companies that invested early in data systems, process mapping, and internal buy-in are ahead. The bad news? The ones that didn't are building solutions mid-busy season with limited margin for error.

This is the new normal for public company tax disclosures. The bar just went up, and the systems that got companies through last year's filings aren't enough anymore.