ASU 2023-09 Corporate Tax Disclosure Requirements: Investor Decision-Making Impact Analysis

The implementation of ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” represents one of the most significant expansions of corporate tax disclosure requirements in recent accounting history. Issued by the Financial Accounting Standards Board (FASB) in December 2023, the standard became effective for public business entities for fiscal years beginning after December 15, 2024, meaning calendar-year companies began applying it in their FY 2025 financial statements filed in early 2026 [1][2]. Non-public entities have an additional implementation year, with requirements effective for FY 2026 [2].

The Forbes analysis by Nathan Goldman published on February 12, 2026, arrives at a critical juncture as the first wave of companies file reports incorporating the new disclosure requirements [1]. This timing provides an opportunity to examine the real-world implications of enhanced tax transparency and the extent to which these disclosures serve their intended purpose of providing “decision-useful information” to investors [3].

The fundamental tension underlying the current debate centers on a core question in accounting standard-setting: whether increased disclosure granularity automatically translates to improved investor comprehension and decision-making, or whether the volume and complexity of new information may paradoxically impair the analytical processes it was designed to support.

The standard introduces several transformative changes to income tax reporting that substantially increase the granularity of information companies must provide:

Public companies must now disclose an eight-category reconciliation between the statutory federal income tax rate and the effective tax rate, with additional disaggregation required for reconciling items meeting a 5% quantitative threshold. This threshold is calculated as 5% of pretax income multiplied by the applicable statutory tax rate. Both dollar amounts and percentages must be presented in these reconciliations [2][3].

All entities must disclose income taxes paid (net of refunds) disaggregated by federal, state, and foreign jurisdictions. Further breakdown by individual jurisdiction is required where amounts equal or exceed 5% of total taxes paid [2].

Annual disclosure of income from continuing operations and related income tax expense by jurisdiction has become mandatory, with income broken down into domestic and foreign components [2].

These requirements collectively create a substantially more detailed picture of corporate tax activities than was previously available in financial statements, responding to investor requests for greater transparency about corporate tax behaviors [3][4].

The implementation of ASU 2023-09 has generated substantial opposition from business groups while receiving mixed reception from investor advocates. Understanding these competing perspectives is essential for evaluating the standard’s ultimate impact on market efficiency and investor decision-making.

Major business organizations have mounted significant resistance to the new requirements. The U.S. Chamber of Commerce sent a formal letter to SEC Chairman Paul Atkins on December 15, 2025, requesting withdrawal or suspension of ASU 2023-09 before companies filed their first annual reports under the standard [6]. The Chamber characterized the standard as reflecting “neither the high-quality accounting standards nor the financial materiality essential to any effective regulatory regime” [6]. The Business Roundtable similarly labeled the requirements “unreasonable and unworkable” [5].

The core of business opposition centers on concerns that the granular disclosures could be misinterpreted and misapplied by external stakeholders. The Tax Executives Institute warned of “real possibility that the information could be misinterpreted and thus misapplied, particularly when amounts are immaterial to a company’s financial position” [5]. The U.S. Chamber of Commerce emphasized that “complexity of new tax information… assumptions required to use the granular information… could be misinterpreted” [5].

The Securities Industry and Financial Markets Association (SIFMA) noted that disaggregating information “would require significant expertise in income-tax accounting, company-specific knowledge, and multi-jurisdictional tax rules” [5]. The American Bankers Association identified banks and institutional investors as groups that “may ignore or misread the new disclosures” [5].

Pro-transparency advocates have pushed back against business community opposition. ITEP.org argued that “holding FASB hostage to nix these disclosures blatantly disregards the interests of investors who want to know what they are investing in” [7]. Research from Intelligize indicates that investors increasingly demand jurisdiction-specific tax information to assess tax risk, profitability, and compliance as part of broader ESG and governance scrutiny [8].

The fundamental disagreement reflects deeper tensions about the purpose of financial disclosure. Business groups argue that the standard pursues social and political objectives rather than genuine investor protection, with the Chamber asserting that ASU 2023-09 “reflects the efforts of politically driven activists in seeking to compel firms to disclose information—using GAAP under the guise of providing decision-useful information for investors—to name, shame, or otherwise vilify companies, influence tax policy, increase taxes on businesses, and deter investment” [6].

The economic impact of ASU 2023-09 extends beyond disclosure complexity to substantial compliance costs that affect corporate resource allocation. An economic study surveying 152 U.S. companies across industries found potential cost increases of up to 62% in impacted business functions, with an average increase of approximately 9.9% across surveyed firms [6].

These costs encompass multiple categories including software systems upgrades to capture jurisdiction-level data, additional staffing requirements for disclosure preparation, training programs for personnel involved in tax reporting, administrative overhead for compliance management, and external advisory fees for specialized expertise [6].

Industries with complex cross-border operations and high state-tax exposure—including energy, manufacturing, and retail sectors—face particular implementation challenges [2]. Companies must develop enhanced systems integration capabilities to capture and report jurisdiction-level tax information accurately, representing a significant operational burden for multinational enterprises.

Beyond compliance costs, the enhanced disclosures create several strategic concerns for affected corporations:

The National Foreign Trade Counsel warned that disclosures “expose U.S. multinationals to enhanced scrutiny by foreign governments and regulators, placing them at a competitive disadvantage” [5]. Country-by-country tax data that reveals detailed information about a company’s global operations could be exploited by foreign regulators or competitors.

Detailed jurisdiction-specific tax payments may attract negative attention from media, activist groups, and the public, regardless of whether the disclosed information reflects legitimate tax planning rather than problematic behavior. The potential for reputational damage exists even when companies have complied fully with applicable tax laws.

Detailed tax position revelations may inadvertently reveal information about business operations, pricing strategies, and profitability that could be valuable to competitors.

One of the most contentious aspects of ASU 2023-09 involves the bright-line thresholds for disclosure. The requirement to disclose items meeting the 5% quantitative threshold, calculated as 5% of pretax income multiplied by the applicable statutory tax rate, has drawn criticism for potentially requiring disclosure of immaterial amounts [2].

The concern extends beyond mere compliance burden to the quality of information available to investors. When financial statements are cluttered with immaterial tax amounts, the signal-to-noise ratio decreases, potentially obscuring genuinely significant information about a company’s tax position [5]. This phenomenon—where mandatory disclosure of minor items creates noise that obscures material information—is a central criticism of the standard.

The FASB’s stated objective of providing “decision-useful information” [3][4] may be undermined if investors become overwhelmed by granular details that are individually immaterial but collectively voluminous. The challenge lies in distinguishing between information that is technically detailed and information that is genuinely useful for investment decision-making.

The ability of investors to effectively analyze the enhanced disclosures varies substantially across market participants. Institutional investors with sophisticated tax and accounting teams may possess the capabilities to process jurisdiction-specific tax information meaningfully. However, individual investors, retail advisory platforms, and less-resourced market participants may lack the expertise necessary to interpret disaggregated tax data appropriately.

The American Bankers Association’s concern that banks “may ignore or misread the new disclosures” [5] highlights the risk that enhanced disclosure requirements may fail their intended purpose for a significant segment of the investor population. If sophisticated institutional investors—the group most frequently cited as driving demand for enhanced transparency—already possess alternative sources of jurisdiction-specific tax information through direct engagement with companies, the marginal benefit of mandatory disclosure may be limited.

The U.S. Chamber of Commerce’s characterization of ASU 2023-09 as potentially serving “politically driven activists” seeking to “name, shame, or otherwise vilify companies” [6] reflects a broader concern about the weaponization of financial disclosure for non-investment purposes.

This concern raises important questions about the appropriate scope of accounting standard-setting. If enhanced disclosures are motivated primarily by social or political objectives rather than genuine investor protection, the legitimacy of requiring such disclosures through the GAAP framework becomes questionable. The debate extends beyond technical accounting considerations to fundamental questions about the role of financial reporting in broader social and political discourse.

The disclosure requirements create potential international tensions as U.S. companies must provide tax information that foreign regulators and governments can access. This transparency may affect tax planning strategies, transfer pricing arrangements, and the competitive positioning of U.S. multinationals relative to foreign competitors operating in jurisdictions with less stringent disclosure requirements [5].

The potential for enhanced scrutiny by foreign tax authorities represents a significant risk factor that could influence corporate behavior beyond the immediate compliance burden. Companies may adjust their tax structures in response to the enhanced visibility provided by the new disclosures, potentially affecting the aggregate level of cross-border investment and the efficiency of capital allocation.

The most significant risk identified by multiple stakeholders is that the granular disclosures may be misinterpreted and misapplied by investors and other external users of financial statements [5]. This risk is particularly acute for disclosures of immaterial amounts or detailed jurisdictional variations that may reflect legitimate tax planning rather than problematic behavior. When investors misapply jurisdiction-specific tax information, capital allocation decisions may become less efficient rather than more so—the opposite of the standard’s intended effect.

The volume of new data required under ASU 2023-09 may overwhelm traditional equity research workflows and analytical frameworks. The eight-category rate-reconciliation tables disaggregated by jurisdiction create substantial complexity that may obscure rather than illuminate meaningful patterns in corporate tax behavior [5]. Market participants may require significant time and resources to develop appropriate analytical frameworks for processing the enhanced information.

U.S. multinational corporations face potential competitive disadvantages from enhanced disclosure of tax positions to foreign regulators and competitors [5]. This risk extends beyond immediate compliance costs to strategic implications for companies engaged in global operations.

Enhanced disclosures may increase securities litigation related to tax position representations. Companies may face claims that disclosed information was incomplete, misleading, or inadequately explained, creating litigation exposure that did not exist under previous disclosure requirements.

The potential for cost increases of up to 62% in impacted business functions [6] represents a material financial risk for companies with complex tax profiles. These costs divert resources from productive investment and may affect profitability.

For investors capable of effectively utilizing jurisdiction-specific tax information, the enhanced disclosures may provide valuable insights into corporate tax risk, profitability patterns, and governance quality. The ability to assess tax positions across jurisdictions may improve the accuracy of valuation models and risk assessments for sophisticated market participants.

The detailed tax disclosures may facilitate integration of tax-related ESG (Environmental, Social, Governance) factors into investment analysis. Investors increasingly consider corporate tax behavior as part of broader sustainability assessments, and the new disclosures may provide standardized data to support these analyses [8].

The current debate over ASU 2023-09 implementation creates an opportunity for FASB to refine the standard based on empirical evidence of actual investor comprehension and decision effects. As companies file their first reports under the new requirements, academic researchers and market participants will generate evidence about the practical impact of enhanced disclosure, potentially informing future amendments to address stakeholder concerns.

The enhanced requirements create demand for specialized advisory services in disclosure preparation, investor communication, and analytical interpretation. Professional services firms, technology providers, and financial data vendors may develop new products and capabilities to help market participants navigate the enhanced disclosure landscape.

The risk profile of ASU 2023-09 is time-sensitive in several dimensions:

Companies filing their first annual reports under the new standard face immediate decisions about disclosure strategy, presentation approach, and response to stakeholder questions. The quality of initial disclosures will shape market expectations and potentially influence regulatory response.

As investors and analysts process the first wave of enhanced disclosures, market reactions will provide feedback about the practical utility of the new information. This period will be critical for assessing whether concerns about misinterpretation and information overload are realized.

FASB may consider amendments addressing stakeholder concerns about bright-line thresholds, materiality definitions, and disclosure requirements. The evidence generated during the initial implementation period will inform these potential refinements.

The implementation of ASU 2023-09 represents a significant regulatory development with implications for corporate disclosure practices, investor analysis, and market efficiency. The key facts and analytical findings from this assessment include:

The standard requires substantially enhanced disclosure of corporate income tax information, including eight-category effective tax rate reconciliation disaggregated by jurisdiction, income taxes paid by federal, state, and foreign jurisdiction, and income from continuing operations with related income tax expense broken down by jurisdiction [2][3]. Effective for public companies for FY 2025 reports filed in early 2026, with non-public entities following for FY 2026 [2].

Major business organizations, including the U.S. Chamber of Commerce and Business Roundtable, have formally opposed the standard, requesting its withdrawal or suspension and characterizing it as potentially misleading and unreasonable [5][6]. Key concerns include investor misinterpretation risks, compliance costs of up to 62% in impacted functions [6], competitive disadvantages from enhanced visibility to foreign regulators, and the pursuit of political rather than investor-protection objectives.

Transparency advocates argue that the disclosures serve legitimate investor interests in understanding corporate tax behavior and facilitate ESG integration [7][8]. The debate reflects fundamental questions about whether more disclosure necessarily equates to better information for investment decisions.

The outcome of this debate will have implications beyond ASU 2023-09 for the broader trajectory of accounting standard-setting and the appropriate scope of mandatory disclosure requirements. As evidence accumulates about actual investor comprehension and decision effects, opportunities may arise for standard refinement that better balances transparency goals with decision-usefulness objectives.

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[0] Internal Analytical Database

[1] Forbes - More Corporate Tax Disclosure, Worse Investor Decisions?

[2] RSM US - ASU 2023-09 Expanded Income Tax Disclosure Requirements

[3] FASB - ASU 2023-09 Income Taxes (Topic 740)

[4] FASB - FASB Issues Standard That Enhances Income Tax Disclosures

[5] Thomson Reuters - FASB Gets Mixed Reviews on Proposed Tax Disclosure Rules

[6] U.S. Chamber of Commerce - Request for Withdrawal or Suspension of ASU 2023-09

[7] ITEP.org - Corporate Tax Transparency’s Disappearing Act

[8] Intelligize - A Tax Transparency Reckoning: Are Corporate Tax Disclosures Entering a New Era?