DC currents: private companies and FIN 48.

• Author: Stromsem, William R.

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THE GOOD NEWS IS THAT ON OCTOBER 15, 2008, the Financial Accounting Standards Board (FASB) deferred the effective date of FIN 48 (FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes) for all nonpublic companies for one year. The bad news is that the year is up already. Company and outside tax and financial accountants should already be heavily involved in their FIN 48 analysis.

The effective date was deferred until fiscal years beginning after December 15, 2008 (i.e., until 2009 for calendar-year companies). However, that means that in January 2009, calendar-year private companies should have completed a FIN 48 analysis of their year-beginning tax positions so that they can record the adjustment for the change in accounting method at the end of 2009. This analysis could be "backed into" later in the year, but as time passes it will be more difficult to recall all tax positions (not just those that are unlikely) for all types of taxes for all open years in all jurisdictions and what the level of certainty and values were under the law at the beginning of the year. So if a company has not already done this analysis and wants to report in accordance with GAAP, the earlier it starts, the better.

FASB Effective Date Extensions

FIN 48 was originally supposed to go into effect for years beginning after December 15, 2006, but FASB recognized the difficulty of nonpublic company compliance and put off the effective date for one year. In February 2007, the Private Company Financial Reporting Committee (PCFRC) raised issues about FIN 48's effective date for private companies. This group of financial statement users, preparers, and CPA practitioners evaluates the costs and benefits of the required procedures and advises FASB on how the day-to-day technical activities of private companies are affected by FASB standards. The PCFRC's concerns were that many nonpublic entities and their CPA practitioners were not fully aware of FIN 48's implications and had not had the necessary time to understand and apply FIN 48 before its effective date. The PCFRC also believed that some passthrough entities did not understand that the interpretation applied to them.

These concerns continued into 2008, and on October 1, 2008, FASB extended the deferral of the application of FIN 48 for private company passthroughs, including nonpublic not-for-profit organizations, until years beginning after December 15, 2008. On October 15, FASB...