Background:
 
In many cases, the tax law is subject to varied interpretation. It is often uncertain whether a tax position will ultimately be sustained under an audit. Since prior standards did not provide specific guidance on how to address uncertainty in accounting for income tax assets and liabilities, companies were inconsistent on how they evaluated tax positions, as well as how they reported these items in their financial statements.
 
FIN 48 is the FASB's answer to create uniformity and consistency in this area. Under this pronouncement, all tax positions will now be evaluated using consistent criteria. Additionally, the disclosure provisions of this Interpretation will provide more information about uncertainty in income tax assets and liabilities.
 

Start the Process Now:
 
While recent updates have eliminated certain disclosure requirements, the processes of identifying, measuring and evaluating these uncertain tax positions can be quite challenging and complex. To further complicate the matter, FIN 48 not only requires evaluating the tax position for the current year, but also requires an evaluation for material uncertain tax positions for prior years still open under the applicable statute of limitations. Therefore, early adoption and implementation of this pronouncement is crucial to ensuring that your company properly complies with FIN 48.