Proposal to delay tax interpretation for nonpublic entities

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09 Nov 2007

The US Financial Accounting Standards Board has proposed a one-year delay of the effective date of Interpretation 48, on accounting for uncertainty in income taxes, for nonpublic entities that have not already applied the Interpretation's provisions.

Proposed effective date of the delay would be for periods beginning after 15 December 2007. The proposal will have a 30-day comment period. FASB's decision responds to a request from the Private Company Financial Reporting Committee, which is concerned about a lack of awareness of Interpretation 48 among nonpublic entities. The Interpretation will continue to be effective for public companies for fiscal years beginning after 15 December 2006.

Principles in FASB Interpretation 48

  • A tax position is a filing position that an entity has taken or expects to take on its tax return. Examples include a decision not to file a tax return, an allocation of income between jurisdictions, and a decision to exclude income from a tax return.
  • An entity cannot recognise a tax benefit in its financial statements unless it concludes that it is 'more likely than not' that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. In that evaluation, the entity must assume that the position:
    • will be examined by a taxing authority that has full knowledge of all relevant information, and
    • will be resolved in the court of last resort.

Comparison with IFRSs

While convergence of US GAAP and IFRSs is a high priority of both FASB and the IASB, the requirements of FIN 48 differ in several respects from those of IFRSs, including differences in when a tax liability is recognised and how it is measured. Deloitte's book on Interpretation 48 includes a comparison of the requirements of the Interpretation and IAS 37 Provisions, Contingent Liabilities and Contingent Assets.


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