NEWS RELEASE 03/20/12
FASB Responds to Financial Accounting Foundation’s Post-Implementation Review Report on FIN 48Norwalk, CT, March 20, 2012—The Financial Accounting Standards Board (FASB) today issued its response to the Financial Accounting Foundation’s (FAF) Post-Implementation Review (PIR) Report on FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48).
“The FASB is pleased with the PIR team’s finding that FIN 48 is resulting in more consistent and useful information for investors and other users of financial statements,” said FASB Chairman Leslie F. Seidman.
“The FASB welcomes the PIR team’s recommendations to continue to improve our processes and we are taking steps to make enhancements in those areas. While the FASB does not plan to undertake a separate project to review FIN 48 at this time, the Board plans to consider the technical findings in future efforts to simplify our standards, converge them with International Financial Reporting Standards, or both,” Seidman added.
In its response, the FASB noted that the PIR Report findings affirm the overall effectiveness of FIN 48. In particular, stakeholder feedback indicates that FIN 48 has resulted in more consistent recognition and measurement of uncertain tax positions and more relevant reported information about income tax uncertainties. Most preparers said that they did not incur significant implementation and compliance costs.
The FASB said that it welcomes the PIR team’s recommendations for improving the standard-setting process, including suggestions that the FASB involve investors earlier in the process, more completely describe the Board’s cost-benefit analysis, and elaborate on how the Board applies its criteria for reexposing decisions reached in redeliberations.
The Board said that the criteria for a review or reconsideration of FIN 48 were not met, based on the criteria established in the FASB Rules of Procedure. However, the FASB said it will consider the PIR Report technical findings in a review of whether simplifications or modifications in U.S. GAAP are warranted for private companies and in its analysis of the remaining differences between U.S. GAAP and International Financial Reporting Standards, in particular, IAS 12, Income Taxes.
“With this response from the FASB, we complete our first Post-Implementation Review,” said John J. Brennan, chairman of the FAF Board of Trustees. “The Trustees believe that this process provides critically important feedback in the standard-setting process and we’re pleased with the overall result. We’ll take what we’ve learned from this first effort and use it to improve the process as we move forward with our next accounting standard reviews.”
The FASB’s full response to the FIN 48 PIR Report is available on the FASB website.
The FASB issued FIN 48 in June 2006 to reduce diversity in practice in recognizing, measuring, and reporting uncertainties relating to income tax positions. The review of FIN 48 (codified in Accounting Standards Codification Topic 740, Incomes Taxes), was undertaken by an independent FAF team working under the oversight of the FAF Board of Trustees. The team’s formal report is available on the FAF website.
The PIR process is designed to be independent of the standard-setting process of the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). The FAF review staff reports to the Trustees and FAF president, but members are drawn from experienced FASB and GASB staff to promote a collaborative review process aimed at improving the standard-setting process. The review staff tested the initial review process by selecting one FASB and one GASB standard, with the FIN 48 standard as the first test.
About the Financial Accounting Foundation
The FAF is responsible for the oversight, administration, and finances of both the Financial Accounting Standards Board (FASB) and its counterpart for state and local government, the Governmental Accounting Standards Board (GASB). The Foundation is also responsible for selecting the members of both Boards and their respective Advisory Councils.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.