Volume 16, No. 8


FIN 48 And The Unbearable Uncertainty Of Income Taxes  FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," became effective on January 1 for calendar year end companies. It was preceded by much corporate angst: though it had been exposed for comment in mid-2005, and issued in final form in mid-2006, firms argued vigorously in December 2006 that they wouldn’t be able to implement the standard on such short notice. The FASB received 435 unsolicited letters in the couple months just before the January implementation deadline. It sounds like even more of a protest when you compare it to the 119 responses to the standard’s 2005 exposure draft.

If not for the last-minute corporate caterwauling, the effects of FIN 48 might not have been so highly anticipated. This review of 100 large S&P 500 companies shows that the actual balance sheet impact of the implementation was fairly light-handed. While disclosures about the amount of "tax reserves" improved significantly, effective tax rates were apparently not affected much by the new standard. It’s the disclosures yet to come, however, that might have the most impact, and that’s most likely why firms stonewalled at the bitter end. How could the disclosures be so significant? Simple: they’re likely to leave clearer clues for the Internal Revenue Service to follow in their quest for closing questionable tax practices.

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