Private companies may have scored a temporary reprieve on the implementation deadline for accounting standard FIN 48 regarding uncertain tax positions, but they nevertheless face an important disclosure requirement under the standard.
FASB has twice deferred the effective date for certain private entities of FASB Interpretation no. 48, Accounting for Uncertainty in Income Taxes. But the Private Company Financial Reporting Committee is working to raise awareness of a lingering disclosure obligation, according to Judith O’Dell, the committee’s chair. Entities not following FIN 48 are required to disclose their current accounting policy for uncertain tax positions.
O’Dell and the PCFRC lobbied FASB in 2007 and 2008 for FIN 48 deferrals and exemption, as well as for guidance and disclosure differences, for private companies.
The committee was created by the AICPA and FASB in late 2006 with the goal of providing recommendations to FASB on accounting standards for privately-held enterprises. “I think we’ve learned how to better work with FASB,” O’Dell said Friday after wrapping up the two-day meeting at FASB’s Norwalk, Conn., headquarters.
FASB members and staff expressed support for face-to-face meetings between the groups and called on the PCFRC to supply more background and context from the private company reporting world for its recommendations.
O’Dell predicted that the committee will focus much of its attention in 2009 on projects surrounding revenue recognition, lease accounting and financial statement presentation.
The PCFRC is also working to forward comments to FASB about the SEC’s proposed road map for IFRS convergence for public companies. “One of our concerns is what will happen to FASB once convergence happens,” O’Dell said. “It’s important to have something like FASB still here in the U.S. or some kind of definitive road map—although maybe not necessarily in the SEC’s bailiwick—that discusses what will happen to private companies.”
Private companies face a host of uncertainties about IFRS that may not be settled until the SEC makes a definitive decision—now scheduled for 2011—about whether U.S. public companies will be required to adopt the international standards.
The PCFRC is working to build a private company financial report user group—a database of names and e-mail addresses of nonmanagement shareholders and individuals from banks, venture capital firms and sureties—that it can turn to for fast feedback on FASB projects. While preparers have expressed some concerns about the joint FASB-IASB financial statement presentation project, for example, some private company financial statement users have been the more vocal critics of the project, O’Dell said. Users are concerned about how they would take the new statement formats and run them through current analysis systems. Such a shift might require changes and upgrades, including to historical databases of financial information.
To join the PCFRC user group, visit the committee’s Web site at www.pcfr.org/usergroup.asp.