Deferral of FIN 48 for Nonpublic Companies
FIN 48 was issued in July 2006 and requires a company to disclose its uncertain tax positions in the footnotes of its financial statements. The Private Company Financial Reporting Committee (PCFRC) interceded on behalf of nonpublic companies and asked for a deferral to allow nonpublic companies the time to assess how to implement FIN 48. This deferral was requested because many nonpublic companies are not-for-profit and do not pay taxes. The FASB agreed to a one year deferral. The PCFRC then requested that nonpublic companies be exempt from the requirements of FIN 48. The FASB will not exempt nonpublic companies, but issued another deferral so that nonpublic companies do not have to adopt FIN 48 until financial periods beginning after December 15, 2008. During the deferral period, the FASB intends to issue an FSP that will clarify how nonpublic companies are to implement FIN 48 and to modify the disclosure requirements for these companies.
The deferral applies to nonpublic companies that are not a consolidated entity of a public enterprise that applies U.S. GAAP and have not issued a full set of U.S. GAAP annual financial statements for the 2008 reporting period before the issuance of this FSP.
Nonpublic companies who elect the additional twelve month deferral must explicitly disclose that they are electing the deferral and disclose its accounting policy for evaluating uncertain tax positions for each set of financial statements where the deferral applies.
Nonpublic companies get another year to think about FIN 48 but must disclose how they are going to evaluate uncertain tax positions in their 2008 filings.
Linda is a CPA living in Southwestern Ohio, working as a research accountant for an investor-owned publicly traded utility company. She specializes in implementing new FASB and SEC requirements and FAS 133 derivative issues. In her role at the utility she has encountered many issues and written many memos, so send in your implementation and derivative issues and Linda will help figure out an answer.