The Financial Accounting Standards Board, in its July 8 Board Meeting, took action to confirm that it intends for private companies to comply with FIN 48 on income taxes this year, making some minor clarifying modifications for which it asked staff to draft an Accounting Standards Update that it plans to be effective for periods ending after September 15, 2009.
Specifically, the Board took the following actions:
- Affirmed that nonpublic entities and public tax-exempt not-for-profit entities are required to apply FIN 48;
- Not to provide a definition of an income tax;
- Decided non-public entities would not need to disclose the following
a. Total unrecognized tax benefits at balance sheet dates when the detailed disclosure requirements of items of unrecognized tax benefits found in paragraph 21(a) is not required to be shown.
b. The fact that the change in accounting for uncertain tax positions had no material effect on the entity’s financial statements. - However, disclosure will be required for non-public entities for the following items
a. Total amount of interest and penalties recognized in the statement of operations
b. Nature of uncertainties and events that are reasonably possible of change in the next 12 months that could affect a significant change in the amounts of unrecognized tax benefits (such as the expiration of statutes of limitations)
c. A description of tax years that remain subject to examination by major jurisdiction. - Clarified that the guidance referencing pass-through entities would include other entities taxed in a similar manner, such as real estate investment trusts and registered investment companies
The Board specifically rejected one comment letter that argued that non-public companies should be allowed to use a FASB 5 measuring standard for tax positions.
Per FSP FIN 48-1, issued December 30, 2008, FIN 48 compliance is required for the annual financial statements issued by non-public companies for fiscal years beginning after December 15, 2008.
Arizona Society of CPAs
J. Michael Stolp
mhstpt
Robert K Minniti, CPA, CFE, Cr.FA, CFF, MBA
Ed Zollars, CPA
Jason Washo, CPA, PFS
dsscpa
cguerriero
Cindie Hubiak, CPA
Jose Herrera
Heidi Frei
Ed, All of my financial statements omit all disclosures. Can you give me an example of what is required on the report of a compilation where all disclosures are omitted?
If none of the items above apply to a financial statements, what would the additional paragraph be for Fin 48?
From a peer reviewer standpoint, what comments will be made if no additional paragraph or Fin 48 sentence is included in the report?
Randy
The changes FASB has made for private companies are all in the disclosure realm, so there would be no impact on no disclosure compilations. However, remember that FIN 48 impacts the measurement of taxes, so if you simply ignored FIN48 entirely, that would be a measurement departure and require comment in the report even in compilations with all disclosures omitted.