A company may take a position on its tax return in good faith, but due to the complexities of tax law, it’s never a sure thing that it will be sustained.The now two-year-old FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48, establishes a “more-likely-than-not” threshold for the reporting of uncertain tax positions on financial statements. Under the rule, an uncertain tax position may not be recognized on the financial statement unless it is more likely than not that it will be sustained on its technical merits, and then it is measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement.
However, the real issue with FIN 48 for private companies and smaller public companies is the cost associated with its adoption and ongoing compliance, according to Mark Friedlich, director of publishing for CCH. “For private companies and small public companies, it’s very difficult to find individuals in the workplace with FIN 48 experience,” he said.
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