FASB Delays FIN 48 Effective Date
for Private Companies

November, 2007

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The Financial Accounting Standards Board (FASB) recently voted to defer the effective date of FASB FIN No. 48, Accounting for Uncertainty in Income Taxes, for all non-public entities to periods beginning after Dec. 15, 2007.

FASB instructed its staff to develop an FASB Staff Position that will have a 30-day comment period once it is released. The decision is seen as a welcome response to the Private Company Financial Reporting Committee’s (PCFRC) recent recommendation that FASB delay the effective date of FIN 48 for private companies.

“FASB’s serious consideration of the PCFRC’s recommendation shows that the Committee and FASB are dedicated to determining whether and where there should be differences in prospective and existing accounting standards for private companies,” said Dan Noll, AICPA Director, Accounting Standards.

In a September letter to FASB, PCFRC Chair Judith H. O’Dell referred to the Committee’s preliminary research indicating many users, preparers, and CPA practitioners are unaware of, or just becoming aware of, the implications of FIN 48.

Many private company financial statement preparers associated with S-corporations, partnerships, and other pass-through entities did not know about FIN 48’s applicability. That is because FIN 48 is an interpretation of FASB Statement No. 109, Accounting for Income Taxes, which does not directly address pass-through entities. The Committee urged the FASB to act quickly to delay the effective date of FIN 48 for private companies, allowing them time to get up to speed.

“Some private companies are just learning about the implications of FIN 48,” said Robert Durak, AICPA Senior Technical Advisor. “Unlike many large public companies, small private companies frequently do not have the resources or time to follow FASB proceedings. The PCFRC is engaged in educational outreach and is contacting constituent groups to determine what issues, if any, they are confronting in implementing FIN 48.”

Judith O’Dell stated that she was very pleased with FASB’s response to the PCFRC’s recommendation. She noted that “it is not the intention of the PCFRC to continue to ask for delays in implementation. We hope to work with the Board and its staff to identify and solve private company issues as standards are being drafted.”

The PCFRC is the result of a broad initiative by the FASB and the American Institute of Certified Public Accountants (AICPA) to improve the standard-setting process to better meet the needs of constituents of privately held enterprises’ financial statements. PCFRC members represent users and preparers of private company financial statements as well as CPA practitioners.

All PCFRC recommendations are available at its Web site, www.pcfr.org. The PCFRC is committed to maintaining an open dialogue with interested parties and PCFR stakeholders. Anyone interested in learning more about the PCFRC should visit its Web site to read meeting highlights or join the Committee’s resource group.

The PCFRC’s next meeting will take place on Dec. 6-7, 2007, at FASB Headquarters in Norwalk, CT. Meetings have also been scheduled for 2008, as follows: January 10-11 in New York; April 24-25 in San Diego; June 19-20 in Atlanta; September 18-19 in Boston, and November 13-14 in New Orleans.