Recently the Financial Accounting Standards Board (FASB) deferred until the first quarter of 2006 any decision on its proposed interpretation of "Accounting for Uncertain Tax Positions." The proposed interpretation would have been effective as of the end of the first fiscal year ending after December.
In step with its effort to improve the quality of financial reporting, the FASB published an exposure draft of a proposed Interpretation, Accounting for Uncertain Tax Positions last July. 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.
Specifically, the proposal 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.
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