FIN 48 Changed

Disclosure Requirements for Private Companies Under FIN 48 Dropped by FASB

On September 2, 2009, the FASB issued an Accounting Standards Update (ASU) 2009-06. As you recall, since July 1, 2009, the FASB Accounting Standards Codification™ (ASC) has been the source of authoritative U.S. GAAP. This latest ASU provides implementation guidance on accounting for uncertainty in income taxes. It also eliminates the disclosure required in ASC, Paragraphs 740-10-50-15(a) through (b) for nonpublic entities, including pass-through and not-for-profit entities.

The guidance in this ASU involves requirements in what was previously known as FASB Interpretation no. 48 (FIN 48). FIN 48 was first effective for fiscal years beginning after Dec. 15, 2006.

The Private Company Financial Reporting Committee (PCFRC) and others had recommended that FASB defer FIN 48’s effective date for nonpublic entities until annual financial statements for periods beginning after Dec. 15, 2008. Another PCFRC recommendation was that FASB exempt private companies from FIN 48.

What the FASB did was to decline to exempt private companies and not-for-profit entities from FIN 48 in its entirety, but they did decide to modify the disclosure requirements for nonpublic entities and provide further guidance for pass-through and not-for-profit entities.

The implementation guidance applies to financial statements of nongovernmental entities presented in conformity with U.S. GAAP. The disclosure amendments apply only to nonpublic entities as defined in Section 740-10-20.

The Amendments are effective for financial statements issued for interim and annual periods ending after September 15, 2009 for entities that are currently applying the standards for accounting for uncertainties in income tax. For those who deferred the application of standards for accounting for uncertainties in income tax, the guidance and disclosure amendments are effective upon adoption of those standards.

The Update contains a number of examples that you may find useful in applying the standards, including:

• definition of a tax position,
• attribution of income taxes to the entity or its owners,
• financial statements of a group of related entities, and
• transition related to ASU 2009-06.

ASU 2009-06 may be assessed on the FASB Website, http://www.fasb.org/.
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