FASB's New Income Tax Disclosure Rules Are Live. Here's What Corporate Tax Teams Are Facing.

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.

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. If your client operates in 15 countries, they're now disclosing granular foreign tax details for each one.

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. If any single jurisdiction represents 5% or more of total taxes paid, it gets its own line item. Most companies weren't tracking cash tax payments at that level of detail before.

The Data Problem

Michael Williams, BDO's national ASC 740 practice leader, told Thomson Reuters that data and technology are the biggest challenges. "A lot of companies build their own kind of bolt-on tool" — cobbling together custom solutions because their existing systems can't deliver the required granularity. Companies are retrofitting processes mid-busy season to comply, which introduces financial statement risk.

Proactive Planning Is the Difference

Williams' advice: get out in front of it early. Assess data gaps, process constraints, and resource needs before the filing deadline. Secure buy-in from leadership. "Companies are going to need business/leadership support to make those types of investments," Williams said. This isn't optional — it's what compliance now costs.

The Timing Problem: Pillar Two and Public CbCR

ASU 2023-09 lands at the same time multinational companies are implementing OECD Pillar Two and complying with public Country-by-Country Reporting mandates in the EU and Australia. Corporate tax departments are managing three overlapping transparency initiatives simultaneously — all requiring more granular data than most systems were designed to deliver.

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. Your clients are either already scrambling to comply or about to realize they're not ready. The companies that invested early in data systems and process mapping are ahead. The ones that didn't are building solutions mid-busy season with limited margin for error.