Guidance on FIN 48 and independence.

• Author: Nevius, Alistair M.
• Position: AICPA ACTIVITIES

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The AICPA's Professional Ethics Executive Committee (PEEC) recently issued nonauthoritative guidance on whether under AICPA Interpretation 101-3, Performance of Nonattest Services, members could assist an attest client in applying FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, without impairing independence, given the potential complexity of the judgments that the client must make or approve in connection with such services.

Tax services are considered nonattest services and are therefore subject to the requirements of Interpretation 101-3. Under this interpretation, when an AICPA member performs nonattest services for an attest client, the client must agree to evaluate the adequacy of the results of the services performed and accept responsibility for those results (among other criteria). The member should be satisfied that the client will be able to meet all these criteria and make an informed judgment on the results of the member's nonattest services. If a client is unwilling or unable to assume these responsibilities under Interpretation 101-3, the CPA's provision of nonattest services would impair independence.

The PEEC decided that a CPA could assist an attest client with the application of FIN 48 without impairing independence, provided the member is satisfied that the client understands why a specific tax position does or does not meet FIN 48's more-likely-than-not (MLTN) threshold and the basis for determining the amount of related unrecognized tax benefits.

FIN 48's MLTN standard...