The Financial Accounting Standards Board has unanimously voted to move forward in implementing new rules that require public companies to take a more structured approach in reporting uncertain tax positions on their financial statements.
The vote means that the board’s Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” -- more commonly referred to as FIN 48 -- will be effective for fiscal years beginning after Dec. 15, 2006. Companies will have to give a range of the likely impact in their annual reports for 2006.
The seven members of the board said that while they were sympathetic to the concerns of companies and trade groups over the rule’s documentation requirement, that wasn’t enough to justify a delay in implementation. The effective date for the rule has already been delayed twice, and the board noted that under existing rules companies should already be documenting uncertain tax positions.
Regulators, including the Securities and Exchange Commission, hope that the interpretation will help make the tax practices of companies more comparable for investors, by taking a uniform approach to the way potential benefits from tax positions are booked.
Separately, the board announced earlier in the week that it will seek input on whether additional and more specific valuation guidance is needed in financial reporting, as well as the process for developing that guidance.
The invitation to comment is available on FASB’s Web site, at www.fasb.org. Comments on the issue are due April 15, and the board will hold a public roundtable later that month to discuss the issue.
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