FASB project to get under way on interpreting FIN 48 for private entities

Summary: The FASB plans to take up a proposed project to amend FIN No. 48 for private entities at the education session that will follow the board's April 8 meeting. The plan is to assess the application of FIN No. 48 to pass-through and not-for-profit entities through a FSP. In addition, the board will revise the disclosure requirements for private entities applying FIN No. 48.

The FASB is planning to revisit its long-running discussion of applying FIN No. 48, Accounting for Uncertainty in Income Taxes, (FASB ASC 740-10) to private entities during the education session following its April 8, 2009, board meeting. Board members are scheduled to look at a proposed project to address two issues—one that concerns interpretative guidance for pass-through entities and not-for-profits and a second that addresses the disclosure requirements for private entities once they adopt FIN No. 48.

At its December 17, 2008, meeting, the FASB decided that it needed to issue separate interpretative guidance for pass-through-entities applying FIN No. 48.

The two issues will be incorporated into one FASB Staff Position (FSP) that, if all goes according to plan, should be ratified by the FASB on April 15, said project manager Paul Glotzer. “Assuming that they approve the staff’s recommendations, it should come out shortly thereafter,” Glotzer said. “We’re not proposing any changes to the standard itself. It’s really just to provide guidance to help people implement it.”

Final FSP No. FIN 48-3, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises, which was issued on December 30, 2008, permits private entities to delay reporting their uncertain tax positions as required under FIN No. 48 until fiscal years that begin after December 15, 2008. When the FASB approved issuing FSP No. FIN 48-3, it also decided it needed a separate set of disclosures to clarify the requirements for private entities.

The most significant change in the revised disclosures exempts private entities from the tabular reconciliation of the total amount of unrecognized tax benefits in paragraphs 21a and 21b of FIN No. 48, Glotzer said.

The issuance of the deferral for private companies stemmed from a request by the Private Company Financial Reporting Committee (PCFRC), which was set up by the FASB and AICPA in 2007 to represent the interests of private companies.

The PCFRC had several concerns, including the connection between the potential tax liability of a unit-holder in a pass-through entity and the financial positions of the entity.