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?
I'm looking for a more detailed description of FIN 48. Could you please post some links on this?
Posted by: my canadian pharmacy | May 29, 2007 3:33 AM | Permalink to Comment