Noncompliance With FIN 48 On Tax Reserves Cited In Seigel & Co Report
July 22, 2008
FEI Summary
More than one-quarter of large public companies are not meeting the disclosure requirements for tax reserves required by Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainties in Income Taxes (known as FIN 48), according to a report issued July 21, 2008 by Seigel & Co., a tax reserve advisory firm founded by former IRS Chief Counsel Stuart E. Seigel.
“The level of noncompliance with FIN 48 disclosure mandates is relatively high and much remains to be done to bring compliance to more acceptable levels,” Seigel says.
The survey results, detailed in The Seigel Tax Reserve Report, (the Report) is the first analysis of its kind and covers initial filings through the period March 31, 2008. J. Brad McGee, president of Seigel & Associates, says the firm intends to track and publish results on a quarterly basis.
The greatest area of noncompliance was the “12-month look-forward rule,” where one of every eight companies provided no disclosure, McGee says. That requirement concerns reporting of tax positions that have a reasonable possibility of significant variation over the next 12 months. “The generally poor performance in this area of disclosure creates the greatest concern,” he adds.
The Report, which will be issued quarterly, provides comprehensive analysis and review of tax reserve disclosures and financial data contained in the financial statements of major corporations filed with their U.S. Securities and Exchange Commission annual reports.
This first edition of the Report covers 601 corporations that have annual revenues of $2 billion or more that filed their SEC reports during the first quarter of 2008. Subsequent Reports will cover annual SEC reports filed by the same revenue sized corporations during the applicable quarter.
Seigel & Co evaluated the extent and quality of FIN 48 disclosures made by these corporations on a company-by-company basis and assigned each a Seigel Index score reflecting the degree of satisfactory compliance with FIN 48’s disclosure mandates. The Report also contains significant quantitative data dealing with tax reserves and related financial information.
Read the Executive Summary of the Report.
Read the full Report.