Disclosure of tax risks in financial statements: balancing transparency and confidentiality

Abstract

The object of the study is the disclosure of information on tax risks in companies’ financial statements against the backdrop of heightened regulatory oversight and growing stakeholder demand for transparency. Key characteristics of the object include the multidimensional nature of risks (legal, operational, transfer-pricing, reputational), dependence on management judgment, and the need to balance transparency and confidentiality.

Problem statement. Users of financial statements require relevant and comparable information on tax uncertainties; however, the absence of a dedicated standard and divergent interpretations of the rules lead to heterogeneous practice and increase information asymmetry.

Unresolved aspects of the problem. Lack of harmonized materiality criteria for tax risks; a gap between financial and non-financial (ESG) disclosures; insufficient detail on assumptions, estimate sensitivity, and triggers for reassessing provisions; the dilemma of commercial sensitivity.

Purpose of the article. The study aims to analyze contemporary approaches to tax-risk disclosure under IFRS and to develop a practical, governance-aligned framework that balances transparency with confidentiality.

Presentation of the main material. The study applies analysis and synthesis, comparative-legal review of international and national norms, content analysis of companies’ reporting, critical literature review, and expert evaluation. It systematizes typical mechanisms for tax-risk disclosure through: provisions, contingent liabilities, and uncertain tax treatments within current and deferred taxes. Incentives for enhanced transparency are grouped into regulatory, market, and internal drivers. Barriers to implementation are also identified. The article proposes four actionable recommendations: (1) clear, calibrated articulation of risks; (2) legal and professional validation prior to disclosure; (3) balanced note content commensurate with likelihood and impact; and (4) ongoing monitoring and internal control.

Conclusions. IFRS provide a methodological foundation for representing tax risks, yet practice remains fragmented. The proposed framework enhances comparability and decision usefulness, reduces information asymmetry, supports risk management and corporate governance, and helps lower the cost of capital and regulatory disputes. Its practical significance lies in providing tools to formalize disclosure policy and to construct transparent notes that meet the expectations of investors and supervisory authorities.