FASB reaches Consensus and Ratifies EITF Issue No. 13-C
On June 26, 2013 the Financial Accounting Standards Board effectively ratified the guidance provided by the Emerging Tax Force Issue No. 13-C. The following is a summary of the consensus:
Unrecognized tax benefits should be netted against tax losses or credit carryforwards from the same jurisdiction that could be utilized to offset the UTB. The UTB would reduce the deferred tax asset established for these losses or credits and would not be recorded as a separate liability.
The new standard requires prospective adoption but allows optional retrospective adoption (for all periods presented).
For public companies, the standard must be adopted in years beginning after December 15, 2013 (and in interim periods).
For private companies the standard must be adopted in years beginning after December 15, 2014 (and in interim periods).
No new disclosures are required. However, if the gross amount of the loss or credit (i.e. the amount listed on the income tax returns as-filed) is disclosed, then further explanation may be needed to explain the difference on the returns versus the amount in the financial statements.
At this time, it appears as if the SEC requirements for the disclosure of UTBs will not change. Therefore, the gross amount of UTBs would still appear in the footnote disclosure.
It will still be important to continue to track the UTBs. For example, there could be an adjustment to the UTB presentation if the position on the UTB changes, or if the loss or credit carryforwards are used. Similarly, if the loss or credit has a full valuation allowance against it, then the VA could change as well if the UTB is no longer necessary.
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