The Financial Accounting Standards Board has agreed to defer the effective date of Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," for nonpublic entities to years beginning after Dec. 15, 2007.
FASB had received a letter from its Private Company Financial Reporting Committee recommending a deferral for nonpublic entities since many were unaware that they were included within the scope of FIN 48 until after it became effective. Many of them require more time to study and apply the provisions.
Originally, nonpublic entities that have already adopted the provisions of FIN 48 would not be eligible for the deferral. But the board voted for an alternative saying that a nonpublic enterprise would still be eligible for the deferral unless they have already issued a full set of annual financial statements incorporating the recognition, measurement and disclosure requirements of Interpretation 48.
Interpretation 48 is an interpretation of FASB Statement No. 109, "Accounting for Income Taxes," which increases the relevancy and comparability of financial reporting by clarifying the way companies account for uncertainty in income taxes. It makes recognition and measurement more consistent, as well as offering clear criteria for subsequently recognizing, derecognizing and measuring tax positions for financial statement purposes.
FASB also issued proposed FASB staff position FAS 157-c, "Measuring Liabilities under FASB Statement No. 157," with a comment deadline of Feb. 18. The FASB staff position clarifies the principles on the fair value measurement of liabilities. Some companies were concerned that there might be a lack of observable markets or observable inputs for the transfer of a liability.
FASB said that a quoted price for the identical liability (unadjusted) in an active market is the best evidence of fair value for that liability. In the absence of a quoted price for the identical liability in an active market, the reporting entity may measure the fair value of its liability at the amount that it would receive as proceeds if it were to issue that liability at the measurement date.
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