FASB notes in paragraph 5 of the proposed FSP that the FASB-AICPA’s joint Private Company Financial Reporting Committee (PCFRC) and other constituents had questioned the applicability of FIN 48 to nonpublic companies, and had requested that nonpublic companies be exempted from FIN 48.
Although FASB decided not to exempt nonpublic enterprises from FIN 48, as stated in paragraph 6 of the proposed FSP, “the Board decided that an additional deferral was necessary to give the Board time to develop guidance for pass-through entities and not-for-profit organizations” on FIN 48.
Paragraph 6 in the proposed FSP continues:
- The Board originally considered limiting the scope of the additional deferral to only pass-through entities because the Board concluded that nonpublic enterprises that were tax-paying entities had been given sufficient time to understand and apply the Interpretation.
- The Board did not believe that all nonpublic enterprises should receive an additional deferral.
- However, the Board struggled in developing an operational scope definition because nonpublic enterprises can have different variations of taxable and pass-through entities and jurisdictions.
- As a result, the Board reluctantly concluded that a partial deferral for certain nonpublic enterprises would create undue complexity that exceeded the benefit of a partial deferral.”
NOTE: FASB states that nonpublic enterprises that have already adopted the provisions of FIN 48 in a full set of annual financial statements are not eligible for the proposed deferral.
The comment deadline on the proposed FSP is Dec. 3.
FEI's Committee on Private Companies, Standards Subcommittee, has filed comment letters with FASB relating to FIN 48 in the past and will consider filing a comment letter on this proposal.
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