VideoMarie Leone, CFO.com | US
January 17, 2007
- Easing the burden of compliance
FASB's decision not to defer implementation of FIN 48 is understandably disappointing to many companies. Tax departments that do not have the resources to conduct a full-fledged analysis of all of their tax positions will now go through a difficult triage process as they inventory and categorize their tax positions. As they go through this process, they should bear three things in mind that may lighten the load. First, regulators do not want companies to generate extensive documentation for their highly certain tax positions. Companies should have in process a system for inventorying their highly certain positions and identifying for each position a resource for supporting the judgment that there is no material uncertainty (e.g., an individual with responsibility for the return), but not much more should be required. Second, "more likely than not" determinations do not require formal opinions that comply with IRS Circular 230. Third, companies should not get bogged down generating multiple settlement scenarios in the "measurement" phase of their analysis. Simpler approaches to measurement will generally be acceptable to auditors. Any company that uses outside counsel to handle tax controversies should ask counsel to provide a reasoned judgment about how a disputed position would likely be settled and should make "unit of account" determinations consistent with that judgment. For an example of this process, see FIN 48: Measuring Tax Benefits in the Real World.
Posted by Neil Kimmelfield | Jan 19, 2007 2:36 PM ET
- stunner?
I'm not sure why this is a "stunner" to the "experts"--why did anyone think FASB would delay an effective date that had already been deliberated and redeliberated since mid-2005? The final interpretation is even less strict than the exposure draft... The fact that tax directors don't want to adopt a standard way of accruing tax exposures is not new information...
Posted by Billy Freer | Jan 18, 2007 2:35 PM ET
- FASB Doesn't Understand
The FASB has missed the boat on one critical issue, that being timing to assess the UTP's. The FASB believes that 6-9 months is adequate time to assess the impact of FIN 48, but calendar year companies did not have this kind of time. First, when FIN 48 was issued (in July) public companies were focused on their Q2 tax provisions. Second, these companies shifted their attention to meeting their tax return reporting obligations due between September 15 and November 15. Third, the companies moved to Q3 reporting obligations. Finally, the companies began assessing the FIN 48 implications in early to mid November. Add Thanksgiving and Christmas holidays and most SEC registrants are in week 6 of assessment (which puts them smack in the middle of year end provision work). This is not any where near a 6-9 month availability. Add to this the need for an inventory of all tax positions, and you have the perfect storm for additional material weaknesses to be identified. This is just the tip of the iceberg, especially when considering the education of personnel throughout a global organization. Nice job by the ivory tower crew.
Posted by Thomas Rudibaugh | Jan 18, 2007 11:36 AM ET
- FASB Might Have Reconsidered
FASB?s intentions with regard to FIN 48 are certainly admirable, in that the increased disclosures of audit risks and standardization of accounting for taxes will undoubtedly benefit capital markets. However, one must not forget that these benefits come with a cost, which is the crippling administrative burden of implementing these guidelines on such short notice and with so many unanswered questions (especially those related to the development of scenarios to be tested under the ?Measurement? step of the Interpretation). The benefits and costs both impact the capital markets, but FASB seems to be measuring its success only by the benefits. If the Board would consider the net impact more carefully, they would probably not have rejected the requests for delay.
Posted by Michelle Johnson, Ceteris Inc. | Jan 18, 2007 10:02 AM ET
- Time to Reject the FASB
Back in the early sixties, the APB told businesses that they had to reduce the depreciable basis of property on which the investment credit had been claimed. Business told the APB to take a hike and refused to do so. The next year, the APB reversed its position.
Maybe it's time to tell the FASB to take that hike -- preferably on a short pier.
The FASB has got to get in step with the "real world" that the rest of us live in.Posted by James Powder | Jan 17, 2007 2:26 PM ET
- Board doesn't have a clue!
Listening to the comments of the FASB Board members, reminds one of the APB 11 days when the tax partner wanted more time to review the tax accural workpapers.
The audit partner, not having a clue regarding the complexity of corporate tax issues,would often say: "Why does it take you tax guys more than 4 hours to review the tax provision?" Some things never change!Posted by jim pyle | Jan 17, 2007 2:05 PM ET
