Lately, I’ve been getting a lot of questions related to FIN 48, Accounting for Uncertainty in Income Taxes (now codified as FASB ASC 740-10). One question, in particular, seems to keep coming up. It goes something like this: “What kind of disclosure do I need to include in the notes if we have adopted FIN 48, but we have determined that there are no uncertain income tax positions.”
The simple answer is: no disclosure! Think about that for a minute…we generally don’t sit around trying to think of the proper disclosure for all of the thousands of GAAP requirements that don’t apply to a particular entity. But, for some reason, we seem to look at FIN 48 differently. The bottom line is this: neither FIN 48, nor any other accounting pronouncement, requires you to disclose the fact that it does not apply.
Even the FASB is on record stating that to do so with respect to FIN 48 would set a dangerous precedent for requiring a similar disclosure with respect to all accounting standards for which there is no material effect on the financial statements.
So, relax…no need to disclose the fact that FIN 48 doesn’t apply or that there are no uncertain income tax positions.
I guess silence really is golden!
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1 comment:
It is, however, interesting that every 10-K issued seems to have a FIN 48 disclosure, regardless of the existence of uncertain tax positions. I see a similar disclosure to the following all the time:
"The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”), effective January 1, 2007. The Company determined that the adoption of FIN 48 did not have a material effect on the Company’s consolidated financial position; therefore, no liability for unrecognized income tax benefits was recognized as of the date of adoption."
I, personally, would not disclose anything unless specifically required to do so. It is really unclear as to why people feel they need to disclose their adoption of the Interpretation. Great post!
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