Income Taxes (Topic 740)

1 Income Taxes (Topic 740) An Amendment of the FASB Accounting Standards CodificationTM No. 2009-06 September 2009 Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities The FASB Accounting Standards CodificationTM is the single source of authoritative nongovernmental generally accepted accounting principles. An Accounting Standards Update is not authoritative; it only provides background information about an issue, updates the Accounting Standards Codification, and provides the basis for conclusions for the Board s decision to update the Accounting Standards Codification.

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3 POSTMASTER: Send address changes to Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. | No. 318 Copyright 2009 by Financial Accounting Foundation. All rights reserved. Content copyrighted by Financial Accounting Foundation may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Foundation.

4 Financial Accounting Foundation claims no copyright in any portion hereof that constitutes a work of the United States Government. An Amendment of the FASB Accounting Standards CodificationTM No. 2009-06 September 2009 Income Taxes (Topic 740) Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities Accounting Standards Update Financial Accounting Standards Boardof the Financial Accounting Foundation401 MERRITT 7, PO BOX 5116, NORWALK, CONNECTICUT 06856-5116 Accounting Standards Update 2009-06 Income Taxes (Topic 740)

5 Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities September 2009 CONTENTS Page Numbers 3 Amendments to the FASB Accounting Standards 10 Background Information and Basis for Conclusions ..11 14 Amendments to the XBRL 1 Summary Why Is the FASB Issuing This Accounting Standards Update (Update)? The Board is issuing this Update to address the need for additional implementation guidance on accounting for uncertainty in Income Taxes .

6 The guidance answers the following questions: 1. Is the Income tax paid by the entity attributable to the entity or its owners? 2. What constitutes a tax position for a pass-through entity or a tax-exempt not-for-profit entity? 3. How should accounting for uncertainty in Income Taxes be applied when a group of related entities comprise both taxable and nontaxable entities? In addition, after consulting with constituents including the FASB s Private Company Financial Reporting Committee (PCFRC) and others, the Board decided to eliminate the disclosures required by paragraph 740-10-50-15(a) through (b) for nonpublic entities.

7 Who Is Affected by the Amendments in This Update? The implementation guidance will apply to financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP). The disclosure amendments will apply only to nonpublic entities as defined in Section 740-10-20. What Are the Key Provisions? The amendments to the FASB Accounting Standards Codification in this Update provide implementation guidance, through examples, to answer the three questions mentioned above about how to apply the standards for uncertainty in Income Taxes .

8 1. If Income Taxes paid by the entity are attributable to the entity, the transaction should be accounted for consistent with the guidance for uncertainty in Income Taxes in Topic 740. If Income Taxes paid by the entity are attributable to the owners, the transaction should be recorded as a transaction with owners. The determination of attribution should be made for each jurisdiction where the entity is subject to Income Taxes 2 and is determined on the basis of laws and regulations of the jurisdiction.

9 2. The amendments clarify that management s determination of the taxable status of the entity, including its status as a pass-through entity or tax-exempt not-for-profit entity, is a tax position subject to the standards required for accounting for uncertainty in Income Taxes . 3. A reporting entity must consider the tax positions of all entities within a related group of entities regardless of the tax status of the reporting entity. In addition, the amendments eliminate the disclosures required by paragraph 740-10-50-15(a) through (b) for nonpublic entities.

10 Paragraph 740-10-50-15(a) requires a tabular reconciliation of the total amount of unrecognized tax benefits at the beginning and end of the periods presented. Paragraph 740-10-50-15(b) requires the disclosure of the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate. How Are the Key Provisions Different from Current Generally Accepted Accounting Principles (GAAP) and Why Are They an Improvement? The amendments eliminate the disclosures required by paragraph 740-10-50-15(a) through (b) for nonpublic entities.