NEWS RELEASE 07/14/05
THE FINANCIAL ACCOUNTING STANDARDS BOARD ISSUES PROPOSAL ON ACCOUNTING FOR UNCERTAIN TAX POSITIONS
Exposure Draft Seeks to Reduce Widespread Diversity In Accounting for Income Taxes
Norwalk, CT, July 14, 2005—In step with its effort to improve the quality of financial reporting, the Financial Accounting Standards Board (FASB) today published an Exposure Draft of a proposed Interpretation, Accounting for Uncertain Tax Positions. The Exposure Draft seeks to reduce the significant diversity in practice associated with recognition and measurement in the accounting for income taxes. It would apply to all tax positions accounted for in accordance with FASB Statement No. 109, Accounting for Income Taxes.
“While, generally, the validity of a tax position is a matter of tax law, in some cases that law is subject to significant and varied interpretations resulting in diverse and inconsistent practices relating to the financial statement recognition of the benefits of uncertain tax positions,” said Edward W. Trott, FASB Board Member. “Today’s proposed Interpretation would increase comparability of financial statements by enabling all uncertain tax positions to be evaluated using consistent criteria.”
Specifically, today’s Exposure Draft requires that a tax position meet a “probable recognition threshold” for the benefit of the uncertain tax position to be recognized in the financial statements. This threshold is to be met assuming that the tax authorities will examine the uncertain tax position. The Exposure Draft contains guidance with respect to the measurement of the benefit that is recognized for an uncertain tax position, when that benefit should be derecognized, and other matters. It has a 60 day comment period.
The Financial Accounting Standards Board invites public comment on this and all Exposure Drafts. Comment letters should be submitted electronically to firstname.lastname@example.org or via regular mail to:
Financial Accounting Standards Board
401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116
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.