FIN 48 Deferral and Financial Statement Disclosure Requirements

Accounting & Auditing

Date:

02/05/2009

Recently, the Financial Accounting Standards Board (FASB) released FSP FIN 48-3 Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises. The FSP defers the effective date of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, for certain nonpublic companies, including nonpublic not-for-profit organizations. The deferral is in effect until the annual financial statements for fiscal years beginning after December 15, 2008.

When adopted, the application of FIN 48 will result in the following:

Companies will need to make a determination and assessment of all material positions taken (or expected to be taken) in any income tax return as of the date FIN 48 is adopted, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities.

Companies may not recognize a benefit related to an uncertain tax position in the financial statements unless it is "more-likely-than-not" that the position will be sustained based on its technical merits and there must be more than a 50 percent likelihood that the position will be sustained if challenged by the highest court.

Companies will be required to accrue interest and penalties that, under relevant tax law, the company would incur if the uncertain tax position(s) ultimately were not sustained.

The deferral of the application of FIN 48 applies to nonpublic companies except for:

Nonpublic companies that have already applied the recognition, measurement, and disclosure provisions of FIN 48 in a full set of annual financial statements.

Nonpublic companies that are a consolidated entity of a public company that applies accounting principles generally accepted in the United States of America (GAAP).

It is important to note that under FSP FIN 48-3, a nonpublic company that elects to defer the application of FIN 48 must explicitly disclose that fact and must disclose its accounting policy for evaluating uncertain tax positions for each set of financial statements where the deferral applies.

FIN 48 Deferral and Financial Statement Disclosure Requirements

Questions?

Contact: