One Year Later: An Analysis of FIN 48 Disclosures in 2007 Forms 10-K

Posted: 1 Nov 2008

See all articles by Nancy B. Nichols

Nancy B. Nichols

James Madison University - College of Business

Date Written: November 3, 2008


Since the issuance of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, in July 2006, corporate tax executives have expressed concerns that the implementation of FIN 48 would provide the IRS with a road map for uncovering uncertain tax positions. An analysis of the 2007 FIN 48 disclosures of calendar year-end Fortune 500 companies found that it is unlikely the IRS will gather much useful information from the disclosures. FIN 48 does not require any disaggregation of the disclosures by jurisdiction and none of the sample companies provided a breakdown by jurisdiction. Because the majority of Fortune 500 companies operate in multiple states and foreign locations, the IRS cannot readily identify U.S. tax contingencies. The only potential value that the FIN 48 disclosures may provide the IRS is to assist them in risk analysis when identifying which taxpayers to select for audit.

The study also found that a large percentage of companies reported changes to prior year tax positions. That finding reminds financial statement users that while the FASB can provide specific guidance for evaluating uncertain tax positions, management must still exercise a significant amount of judgment in the evaluation process. In addition, the explanations provided were typically vague or ambiguous, effectively reducing the value of the disclosure to the reader.

JEL Classification: M41, M44, H25

Suggested Citation

Nichols, Nancy B., One Year Later: An Analysis of FIN 48 Disclosures in 2007 Forms 10-K (November 3, 2008). Tax Notes, Vol. 121, No. 5, 2008, Available at SSRN:

Nancy B. Nichols (Contact Author)

James Madison University - College of Business ( email )

Harrisonburg, VA 22807
United States

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