Financial Reporting

The Private Company Financial Reporting Committee recommended that FASB delay the effective date of FIN 48, Accounting for Uncertainty in Income Taxes , for private companies. The PCFRC voted unanimously at its September meeting to recommend postponing the effective date until guidance is issued on FIN 48’s implications for pass-through entities and until more consideration is given to the usefulness of FIN 48’s disclosure requirements for private companies.

The recommendation was based on preliminary research conducted by the PCFRC on the issues that private company financial statement users, preparers and CPA practitioners are facing with the requirements of FIN 48. That research “raises legitimate questions about the usefulness and relevance of the disclosure requirements of FIN 48 to users,” Judith O’Dell, the committee’s chairwoman, wrote in a letter to FASB Chairman Bob Herz detailing the PCFRC’s recommendations.

FIN 48 took effect for fiscal years beginning after Dec. 15, 2006. Private companies generally were given until the end of the first year of adoption to comply, unless they had an earlier contractual reporting requirement, such as debt covenant calculations or interim financial statements.

The PCFRC also voted to begin identifying issues private company financial reporting constituents are facing with FASB Statement no. 123(R), Share-Based Payment . The committee wants to better understand the costs involved with those accounting issues and whether the associated benefits outweigh the costs.

FASB’s Emerging Issues Task Force issued draft abstracts of the following issues:

EITF Issue no. 07-1, Accounting for Collaborative Arrangements , which focuses on, among other issues, how to define a collaborative relationship and how costs incurred and revenue generated on sales to third parties should be reported by the partners to joint development agreements in each of their respective income statements.

EITF Issue no. 07-4, Application of the Two-Class Method Under FASB Statement no. 128 , Earnings per Share, to Master Limited Partnerships , which focuses on how master limited partnerships with incentive distribution rights calculate earnings per unit, in accordance with FASB Statement no. 128, Earnings per Share .

EITF Issue no. 07-6, Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement no. 66 , Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause , which focuses on determining whether a buy-sell clause is a prohibited form of continuing involvement that would preclude partial sales treatment.

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