FASB approves one-year deferral of FIN 48 for private enterprises

The Financial Accounting Standards Board (FASB) has approved an additional one-year deferral of FASB Interpretation No. 48 (Accounting for Uncertainty in Income Taxes) for private enterprises. Previously, the Board had voted to give a one-year deferral only to pass-through entities. On October 15, FASB extended deferral to all private enterprises. Publicly traded companies are subject to full "FIN 48" mandates.

This is not the first time that FASB has delayed the effective date of FIN 48 for private entities and its decision appears to have been a reluctant one. Several Board members noted that deferral is not an "emergency." Nonetheless, the Board approved the additional one-year deferral.

New standard. FIN 48 sets threshold standards that a tax position must meet to be recognized for financial reporting purposes. Each position must have a more-likely-than-not or greater-than-50-percent chance of being sustained. Tax benefits passing that standard must then be measured against the percentage likelihood of success. FIN 48 applies to public and private enterprises and nonprofits.

The Private Company Financial Reporting Committee (PCFRC) and other groups had raised concerns about the effective date of FIN 48 for private entities. PCFRC told FASB that many private entities, especially pass-throughs, were unaware of the implications of FIN 48. In November 2007, FASB approved a one-year deferral of FIN 48 for private companies and instructed its staff to prepare guidance for pass-throughs and other private entities, including nonprofits, on FIN 48.