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At the 11/7/07 FASB board meeting, the FASB agreed to defer the effective date in FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, for nonpublic companies. FIN 48 was issued in July 2006, and had an effective date of years beginning after December 15, 2006 (2007 for most nonpublic entities). The FASB approved a one-year deferral until periods beginning after December 15, 2007 for nonpublic companies. This deferral does not apply to those nonpublic companies that have already adopted FIN 48.

In considering the deferral, the FASB cited complications associated with “pass-through” entities, for example, S corporations, as well as other concerns that the Private Company Financial Reporting Committee identified in a letter sent to the FASB.

FIN 48 dramatically changes how companies account for uncertain income tax positions. They include a higher standard that tax benefits must meet before they can be recognized in a company’s financial statements. FIN 48 prescribes a comprehensive model for how an entity should recognize, measure, present and disclose in its U.S. GAAP financial statements the impact of uncertain tax positions that management has taken or expects to take on tax returns (including a decision whether to file or not to file a return in a particular jurisdiction).

In applying FIN 48, management will need to determine and assess all material uncertain tax positions existing as of the date they adopt the interpretation, in all jurisdictions for all tax years that are still subject to assessment or challenge under relevant tax statutes. Management is required to assess uncertain tax positions under the presumption that the position will be examined by the relevant tax authorities and that the authorities will have access to all relevant facts.

Although FIN 48 is intended to increase the comparability of financial statements, it also significantly increases the calculation and documentation requirements for individually identified income tax exposures.

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