SOURCE: IOMA

October 03, 2007 11:00 ET

FIN 48 Leaves Tax Directors Feeling Exposed

NEW YORK, NY--(Marketwire - October 3, 2007) - Transparency and disclosure is generally considered a good thing, but tax directors may have a different perspective when dealing with FIN 48. Many are concerned about sharing certain sensitive information with tax authorities.

As reported in Investor Relations Newsletter, published by IOMA, companies that follow the calendar year tax reporting cycle have just started complying with the recent FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). This guidance significantly increases the amount of documentation companies must complete when determining whether they can take a particular tax position.

For example, tax executives must now comply with stricter guidelines around an accounting reserve called "unrecognized tax benefits," and they must disclose unprecedented amounts of information in the 10Q and 10K footnotes to Securities and Exchange Commission filings.

"The new approach will potentially enable observers to compare one company's tax strategy against another's, potentially raising concerns when it appears that one company has greater levels of tax reserves," says Thomas Omberg, a partner in the capital markets risk accounting practice of Deloitte & Touche LLP and a columnist for Investor Relations Newsletter.

"Some also worry that putting a spotlight on financial statement disclosures related to tax reserves could flag the tax authorities to investigate further in these areas -- an unwelcome prospect for even the most upstanding companies," adds Omberg.

In the past, a tax director might elect to take an aggressive position on tax reserves, comfortable that there was a low risk of review by the tax authority. By contrast, now the tax director must assume the tax authority will review the reserves and their associated deductions. It is reasonable to assume many tax directors and accountants will more carefully evaluate tax reserves going forward.

"FIN 48 is leaving tax directors feeling exposed, and investor relations managers may feel that way, too, if they're not prepared to answer questions about transparency and expanded disclosures," says Omberg.

For more information about FIN 48, see the October issue of Investor Relations Newsletter or call Thomas Omberg, a partner in the capital markets risk accounting practice of Deloitte & Touche LLP at 212-436-4126 or at tomberg@deloitte.com. For more information about Investor Relations Newsletter visit www.INVRN.com

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