A report in CFO Magazine says that the IRS may require companies to explain differences between their GAAP income and their taxable income.

The proposed form, known as Schedule M-3, would force corporate taxpayers with assets of more than $10 million to disclose additional information about the difference between financial accounting and taxable income, and reconcile net income or loss in the income statement to taxable income. The new filing will make it easier for IRS agents to spot inconsistencies that could reveal aggressive tax treatments or even fraudulent accounting. Treasury assistant secretary for tax policy Pam Olson says the rule will cut down on unnecessary audits and allow agents to focus on aggressive positions more quickly. "The increased transparency will have a deterrent effect," she says.