The Private Company Financial Reporting Committee met with the Financial Accounting Standards Board to discuss some of the problems that led to deferring controversial rules for accounting for uncertainty in income taxes.
During a meeting at FASB headquarters in Norwalk, Conn., the two groups talked about FASB Interpretation 48 and other matters.
"We discussed lessons learned from our first two years of operation and how we could work better with the board," said PCFRC chair Judy O'Dell (pictured). "They expressed some frustration with how the FIN 48 project evolved. We said we had not been involved, and it was a done deal at the time our committee was formed." The PCFRC is a FASB committee that receives administrative support from the American Institute of CPAs.
FASB recently announced another one-year delay in complying with the FIN 48 rules for private companies that have not already disclosed their uncertain tax positions (see FASB Formally Defers FIN 48, Provides Retirement Plan Disclosure Guidance). Companies have complained about onerous reporting burdens, so FASB has deferred the effective date for annual financial statements until fiscal years beginning after Dec. 15, 2008, the second time it has postponed the effective date for a year. Many public companies have already adopted the rules, which were supposed to go into effect for fiscal years beginning after Dec. 15, 2006.
However, there are new disclosure requirements if a company decides to take the deferral, O'Dell noted. "You have to disclose that you have taken the deferral and explain what your accounting policy is for uncertain tax positions, and that is something that needs to be publicized," she said. "We are very concerned that practitioners will miss that disclosure requirement."
She added that any disagreement between FASB and the PCFRC was just over the process. "They understand our concerns and we understand how their processes work," she said. "We both learned things from it. The board said we should have more face-to-face meetings and I thought that was very positive."
She noted that FASB is working on additional disclosure relief for private companies and how it will apply to pass-through entities. That guidance should be out in the first quarter of 2009. However, don't expect any further extensions of the deadline. "There will be no more deferrals," said O'Dell. "They made that very clear."
Also on the agenda was a discussion of the Securities and Exchange Commission's proposed roadmap for transitioning to International Financial Reporting Standards. The roadmap is currently out for public comment and may be affected by the change in leadership at the SEC.
"I think there is quite a bit of uncertainty about what position the new SEC chair will take and who will fill some of the positions at the SEC," said O'Dell.
The PCFRC plans to submit comments to FASB to incorporate in its own comments to the SEC on the roadmap. "We will stress that private companies will need to be considered, and we have some concerns about what will happen to FASB once public companies go to IFRS," said O'Dell. "There doesn't seem to be any discussion of that. If FASB goes away, we're concerned about who will affect accounting standards for private companies. Everything is in such a state of uncertainty at this point."
However, she noted that the International Accounting Standards Board plans to issue a document on IFRS for private companies. The document is scheduled to be finalized in the first quarter of 2009.
The PCFRC also announced two new members: John R. Burzenski, president and managing officer of Burzenski & Co., in East Haven, Conn., and Steven A. Shelton, president and managing partner of Way, Ray, Shelton and Co., in Tuscaloosa, Ala. They are replacing Carl Bagge, managing partner of Bagge, Cennamo & Co., in Windsor, Conn., and Carisa Wisniewski, a partner with Moss Adams in San Diego, who are rotating off the board after two years of service.
Also at the meeting, FASB and the PCFRC discussed their financial statement presentation project, and plan to do some outreach on the matter. The final comment deadline is in April.
The two groups also talked about their loss contingencies project, which has provoked controversy because of concerns from companies worried about their exposure to litigation. "We had written a comment letter and we were hearing from the FASB staff person on what the board is doing now that the comments are in," said O'Dell. "They're working on some alternatives to that document. I think they're aiming to balance the needs of users and preparers in terms of how much information needs to be disclosed. Our concern was having to disclose prejudicial information. They're aware of those concerns."
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