Post-Implementation review of FIN 48.

• Author: Anderson, Kevin D.
• Position: Financial Accounting Standards Board's Interpretation #48 on 'Accounting for Uncertainty in Income Taxes'

In January 2012, the Financial Accounting Foundation (FAF) issued its Post-Implementation Review (PIR) Report on FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. FAF was organized in 1972 and is the independent, private-sector organization responsible for:

* Establishing and improving financial accounting and reporting standards;

* Educating constituents about those standards;

* The oversight, administration, and finances of its standard-setting boards, FASB and GASB, and their respective advisory councils;

* Selecting the members of the standard-setting boards and advisory councils; and

* Protecting the independence and integrity of the standard-setting process.

The PIR is a new process designed to help the trustees of FAF with their ongoing efforts to evaluate the effectiveness of accounting standards as well as the standard-setting process. The trustees of FAF selected FASB Interpretation No. (FIN) 48 (now codified in Accounting Standards Codification Topic 740, Income Taxes) to test the initial PIR procedures and modify them, as needed, to make them operational. The objectives of the PIR process are to improve standard setting, in part, through a robust, independent, and credible process.

FIN 48 PIR Objectives

FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and it also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The interpretation was intended to reduce perceived inconsistencies in applying accounting rules to income tax contingencies. According to FAF, the objectives of the PIR team's review of FIN 48 were:

1. To determine whether FIN 48 is accomplishing its stated purpose;

2. To evaluate FIN 48's implementation and continuing compliance costs and related benefits; and

3. To provide recommendations to improve FASB's standard-setting process.

PIR Procedures

The PIR team's procedures included reviewing FASB's historical files, conducting stakeholder surveys and questionnaires, reviewing academic publications, reviewing footnote disclosures and other public information for selected public companies, and interviewing stakeholders.

Surveys and questionnaires were sent out to the...