The Financial Accounting Standards Board has decided to defer the effective date for FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," for nonpublic entities.
The guidance, which was issued in July 2006, was supposed to be effective for years beginning after Dec. 15, 2006 (2007 for most nonpublic entities). It will now be effective for periods beginning after Dec. 15, 2007 for entities that have not already begun adopting FIN 48. Those that have already started to implement FIN 48 must continue to do so.
The decision comes after a request from FASB's Private Company Financial Reporting Committee for more time to implement the standard, especially for pass-through entities such as partnerships and S-corporations, many of which had not been aware that FIN 48 would be applicable to them.
FIN 48 provides guidance for FASB Statement No. 109, "Accounting for Income Taxes," but FASB 109 does not directly address pass-through entities. The guidance involves matters such as recognition and measurement of the tax position taken on a return. Companies need to assess all of the tax positions they have taken in any year for which the statute of limitations remains open. They also have to disclose any tax reserves in case the government successfully challenges their tax positions and make risk-based assessments of whether their positions would be sustainable.
"I think in general it's a good idea FASB did this," said Andrew Burczyk, a director with CBiz Accounting, Tax & Advisory Services. "Most of our clients have been prepared for this, but a number of clients that work for smaller CPA firms are not as far in the process. This was a good move on FASB's part to listen to the smaller firms and give them time to implement it correctly."
FASB plans to issue a formal deferral in a staff position, which will be open to a 30-day comment period.
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