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Jan17
No delay for FIN 48
For those of you struggling with how to implement FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), in time for this year’s audit – keep struggling.  Any help (or hope) that you thought might be on its way in the form of a postponement in the implementation of FIN 48 is not coming.  Today, the FASB rejected any implementation delay, in spite of receiving close to 400 unsolicited letters requesting a one-year postponement in its December 15, 2006 effective date.  (For those of you who don’t write to the FASB on a regular basis, for the FASB to get this many letters is absolutely astounding, solicited or not.  As I think back, I don’t believe they got that many solicited responses during the original FAS 13 comment period.)

 

 

 

Under FIN 48, a company must determine whether it is more likely than not that any tax positions it takes will be sustained upon examination by the IRS.  Once it has determined that the more likely than not standard is met, the company must measure the tax position to determine the amount of the benefit to be recognized in its financial statements using some crazy probability method (see my previous post on FIN 48 for a more painful explanation).

Now, if you are thinking “Oh, this doesn’t apply to me,” think again.  When you do a tax deal, you are taking the position that you will receive the tax benefits and, under FIN 48, any tax position that you take must be evaluated.  Are you setting residuals at less than the 20% requirement of Rev. Proc. 2001-28?  Maybe your tax position isn’t as strong as you think.  FIN 48 requires you to assess, measure, and, under Sarbanes-Oxley, address the internal controls related to, this position, irrespective of where you come down on the issue.

 

 

 

So, why was the delay rejected, given the FASB’s past history of acceding to such requests?  Certainly, the SEC pressure behind the pronouncement had an affect.  The FASB's new committee of investor advisors, the Investors Technical Advisory Committee (ITAC), also came out strongly against any delay.  ITACs position is understandable, particularly since they don’t have to do any of the work to comply, and certainly don’t have to struggle with the principles-based rules that no one can seem to figure out how to apply on a consistent basis.

 

 

 

How does that thumb in your eye feel?

 

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I'm looking for a more detailed description of FIN 48. Could you please post some links on this?

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