Review of FIN 48 isn’t necessary, FASB decides

FASB has concluded that it is not necessary to review or reconsider FIN 48 as a result of a “post-implementation review” conducted by FASB’s parent organization, the Financial Accounting Foundation (FAF).

The FAF review found that FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), is resulting in more consistent and useful information for users of financial statements. But in a news release Tuesday, FASB said it will consider the post-implementation report’s technical findings in FASB’s review of whether simplifications or modifications in U.S. GAAP are needed for private companies.

FASB also will consider the post-implementation review findings in its analysis of remaining differences between U.S. GAAP and IFRS standards, particularly IAS 12, Income Taxes.

FIN 48 is now codified in FASB Accounting Standards Codification Topic 740, Income Taxes.

Released in January, the report on FIN 48 was the first in a new review program designed to provide feedback and analysis of standards. It was conducted by an independent team under the oversight of the FAF board of trustees.

While the report said the benefits of FIN 48 outweigh its costs, it also said preparers—particularly those from smaller organizations—reported incurring significant costs, such as additional audit fees and external legal and accounting advice.

“While the FASB does not plan to undertake a separate project to review FIN 48 at this time, the board plans to consider the technical findings in future efforts to simplify our standards, converge them with International Financial Reporting Standards, or both,” said FASB Chairman Leslie Seidman.

FASB said the criteria established in its rules of procedure for review or reconsideration of a standard have not been met by FIN 48.

In June 2006, FASB issued FIN 48 in an effort to increase consistency in recognizing, measuring, and reporting uncertainties relating to income tax positions. The standard has been part of the ongoing debate over private company financial reporting.

The Private Company Financial Reporting Committee (PCFRC), formed by the AICPA and FASB to give nonpublic companies more of a voice in the standard-setting process, recommended in May 2008 that private companies be exempted from FIN 48. FASB denied that recommendation, but eliminated certain disclosure requirements for nonpublic entities relating to unrecognized tax benefits.

Meanwhile, FAF has proposed creating a Private Company Standards Improvement Council (PCSIC) to recommend exemptions to U.S. GAAP for private companies. The AICPA opposes that plan because the PCSIC’s recommendations would be subject to FASB’s approval. Seidman said last week that the FAF trustees could render a decision on the issue during their meeting on May 22–23.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.

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