FEI Asks FASB to Delay FIN 48 For Private Co’s; Reiterates Call To Delay FAS 157

November 6, 2007

FEI Summary

In advance of the Nov. 7, 2007 Financial Accounting Standards Board (FASB) board meeting and educational session at which FASB will discuss a potential delay in FIN 48, Accounting for Uncertainty in Income Taxes, for private companies, and a potential delay in FAS 157, Fair Value Measurement, respectively, technical committees of Financial Executives International (FEI) have sent FASB letters calling for, or reiterating their previous call for, a delay in the implementation date of these standards (in the case of FIN 48, with respect to the implementation date for private companies only, as described further below).

Letters sent to FASB this week by FEI include:

• A letter from FEI’s Committee on Private Companies (CPC) Standards Subcommittee asking FASB to delay the implementation date of FIN 48, Accounting for Uncertainty in Income Taxes, for private companies. This letter formally supports the comment letter sent by the FASB-AICPA sponsored Private Company Financial Reporting Committee (PCFRC) that requested a delay of FIN 48 for private companies.
• A separate letter from FEI’s CPC Standards Subcommittee, asking FASB to delay the implementation date of FAS 157, Fair Value Measurement, for private companies, and to conduct a study during that time. “Should there be further study by the FASB,” says the letter, “we are confident that the conclusion it would come to would be that private companies should be exempted; however pending such a conclusion of the study, there should be a delay for private companies of FAS 157.” 
• A joint letter from FEI’s Committee on Corporate Reporting (CCR) and Small Public Company Task Force (SPCTF) – sent as a follow-up to their original letter dated October 1, reiterating and further explaining their request for a full deferral of FAS 157 (i.e., for all companies, and for all parts of the standard – financial assets and liabilities and well as nonfinancial). The letter notes issues have been raised by FEI’s Valuation Resource Group (VRG) with respect to implementing FAS 157, including: definition of a market participant, determination of the principal market, unit of valuation, and effect of bid/ask spreads on measurement (the “auction” scenario). “The issues raised in each of these areas,” said the FEI CCR/SPCTF letter, “apply equally to financial as well as nonfinancial assets and liabilities and the potential for clarifications and/or substantive modifications to the principles in the standard must be carefully considered.” The letter continued, “We are concerned that: (1) additional fundamental issues may arise in subsequent discussions with the VRG, and (2) there is insufficient time for their resolution and communication to constituents in advance of the required adoption date.”

Prepared Nov. 6, 2007 by Edith Orenstein, Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not reflect FEI opinion unless specifically stated above.