What is an uncertain tax positions?

An “uncertain tax treatment” is a tax treatment for which there is uncertainty whether the relevant tax authority will accept the tax treatment under the local tax law. IFRIC 23 does not include requirements relating to interest and penalties associated with uncertain tax treatments.

What is FIN 48 called now?

ASC 740, formerly known as FIN 48, offers guidance on uncertain tax positions. It is broad in scope and now applies to both nonprofit and for-profit entities.

What is FIN 48 liability?

FIN 48 (mostly codified at ASC 740-10) is an official interpretation of United States accounting rules that requires businesses to analyze and disclose income tax risks. A business may recognize an income tax benefit only if it is more likely than not that the benefit will be sustained.

When does a company have an unrecognized tax benefit?

An “unrecognized tax benefit” is the difference between a tax position that a company takes, or expects to take, on its income tax return and the benefit it recognizes on its financial statements. The difference usually arises when a business is taking an uncertain tax position that has not yet been resolved through an audit or litigation.

What does FASB mean by unrecognized tax benefits?

The Financial Accounting Standards Board (FASB) recently released guidance on how companies should present unrecognized tax benefits on their financial statements when they also have a net operating loss (NOL), similar tax loss or tax credit to carry forward.

What does tabular reconciliation of unrecognized tax benefits do?

Further, the currently required tabular reconciliation of the gross amount of unrecognized tax benefits will provide public company financial statement users with relevant information about the unrecognized tax benefits offset against NOL carryforwards, similar tax losses or tax credit carryforwards.

When to classify an unrecognized benefit as a current liability?

A company that uses a classified statement of financial position must classify an unrecognized tax benefit that’s presented as a liability as a current liability — or reduce the amount of an NOL carryforward or amount refundable — if the company anticipates the payment or receipt of cash within one year or, if longer, the operating cycle.