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Abstract: 

On July 14, 2005, the Financial Statements Accounting Board (FASB) issued, “Proposed Interpretation Accounting for Uncertain Tax Positions, an interpretation of FASB Statement No. 109.” The purpose of the interpretation (FIN) is to clarify when and how to measure the tax benefits of an uncertain tax position for financial statement reporting purposes. The proposed FIN replaces the existing loss contingency treatment of uncertain tax positions under FAS 5 with gain contingency treatment. The key difference is that under the loss model, the uncertain tax benefit belongs to the firm, and the government has a contingent claim. Under the gain model, the uncertain tax benefit belongs to the government, under the presumption that the firm may have retained cash that should have been sent to the government, and the firm has a contingent claim. Although the interpretation was proposed to be effective as of the end of the first fiscal year ending after December 15, 2005, the FASB held a roundtable discussion on October 10, 2005, and announced that it expects to issue a final interpretation, which would include amendments to FAS 109, in the first quarter of 2006.

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Affiliations:  1: University of Connecticut School of Business.