FIN 48 TO BE DELAYED ONE YEAR FOR NONPUBLIC COMPANIES

In an announcement that will have an impact on most — if not all — non-publicly-traded companies, the Financial Accounting Standards Board (FASB) has decided to delay the implementation of FIN 48 by nonpublic entities for one year.

What Is FIN 48?

FASB’s Statement of Financial Accounting Standards (SFAS) No. 109 sets forth the financial accounting and reporting standards for the effects of income taxes resulting from an entity’s activities during the current and previous tax years. FIN 48 (Accounting for Uncertainty in Income Taxes) directs how SFAS No. 109 applies by setting a threshold condition that a tax position taken by an entity must satisfy before any part of the benefit of that position may be recognized in the entity’s financial statements.

Under FIN 48, tax benefits resulting from uncertain tax positions that reduce an entity’s current or future income-tax liability may be reported in financial statements only to the extent each such benefit (such as a deduction or credit) is recognized, measured, and disclosed according to a process outlined in FIN 48. It has been anticipated that FIN 48 will result in most companies realizing higher audit costs and undergoing more analysis of the tax positions they were taking.

FIN 48 Implementation Delayed

FIN 48 generally applies to all entities and was effective for fiscal years beginning after December 15, 2006. Last February, however, the FASB deferred the effective date for most nonpublic enterprises to annual financial statements for fiscal years beginning after December 15, 2007. Now, the FASB has proposed another one-year deferral for all nonpublic entities until fiscal years beginning after December 15, 2008. Public entities are still subject to the earlier implementation date.

If you have any questions about FIN 48 and how it applies to your firm, please contact us.