Accounting Issues

Update on FIN 48 for NFP Organizations

The Financial Accounting Standards Board (FASB) has agreed to defer the effective date of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, until years beginning after December 15, 2007 for “nonpublic” entities.

A proposed FASB Staff Position (FSP) related to the deferral was recently issued to define “nonpublic.” Entities with debt or equity securities traded in a public market and obligors for conduit debt securities traded in a public market are excluded from the definition of “nonpublic”.

Conduit debt securities are typically issued by a governmental entity, such as a local economic development authority, on behalf of another entity (the obligor). There are many other types of conduit debt securities that are common for both commercial and not-for-profit entities, including hospitals. Substantially all conduit debt securities are traded in public markets (typically in over-the-counter markets) and organizations who are obligors for conduit debt securities will likely not meet the definition of a “nonpublic” entity for the deferral FIN 48.

Organizations who are obligors for conduit debt securities or have debt or equity securities traded in a public market will not be eligible for the deferral of FIN 48 and will need to implement the standard in fiscal years beginning after December 15, 2006 (January 1, 2007 for calendar year organizations).

The FASB issued FIN 48 on July 13, 2006. The standard provides that all entities using GAAP will be required to disclose information regarding uncertain tax positions in the footnotes to their financial statements. The new Form 990 for 2008 also requires disclosure of the FIN 48 footnote.