FASB Votes To Issue Additional Guidance Relating To FIN 48; Focus On Pass-Throughs

At its board meeting earlier today, FASB voted to issue additional guidance relating to FIN 48, Accounting for Uncertainty in Income Taxes. Although the guidance is aimed primarily at private companies and not-for-profits - specifically as relates to pass-through entities - FASB board members encouraged the staff to consider amending the title of the new guidance, to reflect the fact that all entities are technically within the scope of the guidance, in that all entities need to determine their tax status (including, according to FASB, whether they are a pass-through entity) as part of implementing FIN 48.

The proposed guidance, released earlier this year as Proposed FSP FIn 48-d, was entitled: Application Guidance for Pass-through Entities and Tax-Exempt Not-for Profit Entities and Disclosure Modifications for Nonpublic Entities. FASB received fourteen comment letters on the proposal, including this letter from FEI's Committee on Private Companies, Standards Subcommittee.

During today's board meeting, FASB Project Manager Paul Glotzer summarized for FASB board members that commenters were generally supportive of the proposed guidance; he presented certain issues to the board for their consideration in finalizing the guidance.

Among the issues discussed, Glotzer noted there was one request to permit private companies to use a FAS 5 model rather than a FIN 48 model for uncertain income taxes, since the FAS 5 model would be simpler, but the board agreed with the staff's view not to change the model for private companies (although private companies that are pass-throughs will be able to make use of additional guidance and examples pertaining to pass-throughs in the new guidance, and will benefit from reduced disclosure requirements applicable to pass-through entities set forth in the new guidance).

Another issue discussed, raised in the comment letter of the FASB-AICPA Private Company Financial Reporting Committee (PCFRC) was that: "[T]he PCFRC believes that the FASB should make clear in the proposed FSP that the accounting for transactions with owners (for example, loans and distributions) has not changed and such transactions should be accounted for under existing applicable standards." At today's board meeting, FASB board members did not object to clarifying this point, and Glotzer noted: "I don’t think there’s a problem putting that in there, if it makes it clearer because some people have questions, it's more of a drafting issue."

Following the meeting, Glotzer summed up for us, "There were no substantive changes to proposed FSP FIN 48-d, other than the title will likely be changed to something broader in that the FSP applies to all entities (public and private), although the elimination of certain disclosure requirements applies only to non-public entities. In addition, the board voted the effective date of the final FSP will be for periods ending after Sept. 15, 2009."

Further details on this matter and the other issue deliberated by FASB today - finalizing proposed FSP FAS 157-f, Measuring Liabilities under FASB Statement No. 157 - refer to FASB's Summary of Board Decisions which is generally posted same-day or next day in FASB’s News Center; a related summary will be posted on FEI’s website.

See also our separate blog post about FASB's announcement earlier today that they are launching a new project on the Disclosure Framework.

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