FASB Formally Defers FIN 48, Provides Retirement Plan Disclosure Guidance

The Financial Accounting Standards Board has released a staff position officially deferring the effective date of FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes," for nonpublic pass-through entities and nonprofit organizations, and released guidance on accounting for the assets in postretirement plans.

The FASB Staff Position, or FSP FIN 48-3, defers the effective date for annual financial statements until fiscal years beginning after Dec. 15, 2008. When FIN 48 was issued in July 2006, it was supposed to be effective for fiscal years beginning after Dec. 15, 2006. Many large public companies have adopted it, but smaller organizations, including pass-through entities such as S corporations and partnerships, as well as nonprofits, were concerned about how to apply the stringent requirements.

FASB decided in February to defer the effective date to make it apply to annual financial statements for fiscal years beginning after Dec. 15, 2007, but many organizations said they still needed more time and more guidance on applying the standards. Many not-for-profit organizations and pass-through entities have not previously paid income taxes and, therefore, have not applied the provisions of Statement 109. As a result, the Private Company Financial Reporting Committee observed that those types of entities showed a general lack of preparedness in applying the requirements of both Statement 109 and Interpretation 48 by the original effective date.

The deferred effective date is intended to give FASB additional time to develop guidance on the application of Interpretation 48 by pass-through entities and not-for-profit organizations. The deferred effective date also will give the board time to amend the disclosure requirements of Interpretation 48 for nonpublic enterprises.

However, nonpublic consolidated entities of public enterprises that apply U.S. generally accepted accounting principles are not eligible for the deferral. Nonpublic enterprises that have applied the recognition, measurement and disclosure provisions of Interpretation 48 in a full set of annual financial statements issued prior to the issuance of the FSP also are not eligible for the deferral.

FASB also released FSP FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets." The FASB Staff Position amends FASB Statement No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits," providing guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement plan. The FSP also includes a technical amendment to Statement 132(R) that requires a nonpublic entity to disclose net periodic benefit cost for each annual period for which a statement of income is presented.

The FSP comes in response to concerns about the lack of transparency surrounding the types of assets and associated risks in an employer's defined benefit pension or other postretirement plan, and events in the economy and markets that could have a significant effect on the value of plan assets. FASB later broadened the scope of the project to consider requiring employers to disclose information about fair value measurements of plan assets.