What impact could FIN 48 have on consolidated financial statements?
This new guidance will create more consistency and comparability between reporting periods. Uncertain tax positions sometimes get a bad rap. It’s not necessarily that taxpayers are taking risky positions, it’s that the tax code is complex and sometimes convoluted and you (the preparer) may not know and the IRS may not know with 100 percent certainty what a tax position should be. What this guidance does is ask companies to re-evaluate all of their tax positions (e.g. R&D credits, utilization of net operating losses, etc.) and apply a consistent ‘more-likely-than-not’ standard in determining whether to recognize such tax positions. That is, the firm must ask itself, If the IRS audits this tax position, will it more likely than not hold up? The interpretation will affect quarterly statements as well as annual statements, as the evaluation of tax positions must be made in each reporting period. Can a company consider broadly accepted conditions to determine that its tax position will more
