FASB has raised the bar on tax transparency. For companies, that means new headaches—new systems, tighter controls, and higher compliance hurdles. For providers, it spells opportunity.
In this white paper, we dive into the details, the disclosures, and the opportunities this significant regulatory change presents for savvy service providers who are ready to step in as strategic partners.
Less Black Box, More Daylight
Few numbers matter more to investors than a company’s effective tax rate. For years, they and others have pressed for greater clarity and comparability in how those rates were calculated. How do companies reconcile their effective tax rate (ETR) to the statutory rate? Why do those rates differ? Where are they paying taxes? Most importantly, what does that mean for the stability of future cash flows—always an investor’s ultimate concern?
Under ASC 740, the answers were often obscured. Companies disclosed an ETR, but usually in broad categories, with cash taxes aggregated into a single line. That left investors guessing which jurisdictions drove the rate, how durable those drivers were, and whether cash payments matched reported expense. As global tax rules proliferated—minimum taxes, shifting cross-border regimes, vanishing credits, volatile state laws—those blind spots became not only harder to ignore, but also significantly more material.
After years of debate, FASB issued ASU 2023-09 in December 2023— a significant update to ASC 740. Effective for calendar year 2025, public business entities must now disaggregate their ETR reconciliation into standard categories, disaggregate material items, and disclose cash taxes by jurisdiction. Private companies and other entities follow in 2026.
By requiring greater transparency, FASB has addressed investor demands: a clearer line of sight into tax strategies, regional exposures, and the makeup of tax cash flows. For companies, though, the road ahead may be anything but smooth.
What ASU 2023-09 Means for the Provision
At its core, the provision is an estimate: what a company expects to owe in income tax expense for the current period. Under the prior ASC 740 framework, the provision reconciled book income to taxable income and produced an effective tax rate, but details were sparse.
What the new standard changes is how that story gets told. Suddenly, the provision is a bigger, more visible deliverable that must not only reconcile cleanly in far greater detail (and withstand
