No Job Name

1 FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxesan interpretation of fasb statement No. 109 Financial Accounting Standards BoardORIGINALPRONOUNCEMENTSASAMENDEDC opyright 2010 by Financial Accounting Foundation. All rights reserved. Content copyrighted by Financial Accounting Foundation may not be repro-duced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, with-out the prior written permission of the Financial Accounting Foundation. FASB Interpretation No.

2 48 Accounting for Uncertainty in Income Taxesan interpretation of fasb statement No. 109 STATUSI ssued: June 2006 Effective Date: For fiscal years beginning after December 15, 2006 Affects: Amends FAS 5, paragraphs 2 and 39 Replaces FAS 109, paragraph 8(a)Amends FAS 109, paragraphs 10 and 289 Affected by: Paragraphs 8, 10(b), 12, A3, A4, A22, A24 through A26, and A29 amended by FSP FIN 48-1,paragraphs A1(a), A1(b), and A1(d) through A1(k), respectivelyParagraphs 10A through 10C added by FSP FIN 48-1, paragraph A1(c)Paragraph 12A added by FAS 141(R), paragraph E35, and amended by FAS 164,paragraph E19 Paragraph 12B added by FAS 141(R), paragraph 35 Paragraphs 13 and A30 amended by Accounting Standards Update 2010-08, paragraphs A14(a)and A14(b), respectivelyParagraph 22 amended by FSP FIN 48-2, paragraph 6(a)Paragraph 22A added by FSP FIN 48-2, paragraph 6(b)

3 Paragraph 22A amended by FSP FIN 48-3, paragraph 12 Paragraph A31 amended by FAS 165, paragraph B16 Paragraph C1 amended by FAS 162, paragraph B13 Footnote 3 deleted by FAS 162, paragraph B13 Other Interpretive Releases: FASB Staff Position FAS 13-2 FASB Staff Positions FIN 48-1 through FIN 48-3 (FSP FIN 48-2 effectivelysuperseded by FSP FIN 48-3)Issues Discussed by FASB Emerging Issues Task Force (EITF)Affects: No EITF IssuesInterpreted by: No EITF IssuesRelated Issue: EITF Issue No. 93-7 FIN48 FIN48 1 SUMMARYThis Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise s fi-nancial statements in accordance with fasb statement No.

4 109,Accounting for Income Interpre-tation prescribes a recognition threshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return. This Interpretation also providesguidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, evaluation of a tax position in accordance with this Interpretation is a two-step process. The first step isrecognition: The enterprise determines whether it is more likely than not that a tax position will be sustainedupon examination, including resolution of any related appeals or litigation processes, based on the technicalmerits of the position.

5 In evaluating whether a tax position has met the more-likely-than-not recognition thresh-old, the enterprise should presume that the position will be examined by the appropriate taxing authority thathas full knowledge of all relevant information. The second step is measurement: A tax position that meets themore-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in thefinancial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percentlikely of being realized upon between tax positions taken in a tax return and amounts recognized in the financial statementswill generally result in one of the following:a.

6 An increase in a liability for income taxes payable or a reduction of an income tax refund receivableb. A reduction in a deferred tax asset or an increase in a deferred tax liabilityc. Both (a) and (b).An enterprise that presents a classified statement of financial position should classify a liability for unrecog-nized tax benefits as current to the extent that the enterprise anticipates making a payment within one year orthe operating cycle, if longer. An income tax liability should not be classified as a deferred tax liability unless itresults from a taxable temporary difference (that is, a difference between the tax basis of an asset or a liabilityas calculated using this Interpretation and its reported amount in the statement of financial position).

7 This Inter-pretation does not change the classification requirements for deferred positions that previously failed to meet the more-likely-than-not recognition threshold should be recog-nized in the first subsequent financial reporting period in which that threshold is met. Previously recognized taxpositions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the firstsubsequent financial reporting period in which that threshold is no longer met. Use of a valuation allowance asdescribed in Statement 109 is not an appropriate substitute for the derecognition of a tax position.

8 The require-ment to assess the need for a valuation allowance for deferred tax assets based on the sufficiency of future tax-able income is unchanged by this for Issuing This InterpretationIn principle, the validity of a tax position is a matter of tax law. It is not controversial to recognize the benefitof a tax position in an enterprise s financial statements when the degree of confidence is high that that tax posi-tion will be sustained upon examination by a taxing authority. However, in some cases, the law is subject tovaried interpretation, and whether a tax position will ultimately be sustained may be uncertain.

9 Statement 109contains no specific guidance on how to address uncertainty in accounting for income tax assets and a result, diverse accounting practices have developed resulting in inconsistency in the criteria used to recog-nize, derecognize, and measure benefits related to income taxes. This diversity in practice has resulted in non-comparability in reporting income tax assets and InterpretationsFIN48 2 How This Interpretation Will Improve Financial ReportingThis Interpretation will result in increased relevance and comparability in financial reporting of incometaxes because all tax positions accounted for in accordance with Statement 109 will be evaluated for recogni-tion, derecognition, and measurement using consistent criteria.

10 Finally, the disclosure provisions of this Inter-pretation will provide more information about the uncertainty in income tax assets and the Conclusions in This Interpretation Relate to the Conceptual FrameworkIn developing the recognition and measurement guidance of this Interpretation, the Board considered thequalitative characteristics discussed in FASB Concepts Statement No. 2,Qualitative Characteristics of Ac-counting characteristics emphasize that comparable information enables users to identifysimilarities in and differences between two sets of economic events. This Interpretation establishes a consistentthreshold for recognizing current and deferred a position is taken in a tax return that reduces the amount of income taxes paid to a taxing authority,the enterprise realizes an immediate economic benefit.