Accounting Horizons Vol. 21, No. 1 March 2007 pp. 103-112 A


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I need a summary of an article two pages maximum with two questions at the end. Please can someone do it for me ? I am uploading the article as an attachment AAA FASC Accounting Horizons March 2007.pdf Accounting Horizons Vol. 21, No. 1 March 2007 pp. 103–112 A Response to the FASB Exposure Draft on Accounting for Uncertain Tax Positions: An Interpretation of FASB Statement No. 109 American Accounting Association’s Financial Accounting Standards Committee Hollis A. Skaife, Chair (principal co-author); Mark T. Bradshaw; Paquita Y. Davis-Friday; Elizabeth D. Gordon (principal co-author); Patrick E. Hopkins; Robert Laux; Karen K. Nelson; K. Ramesh; Shiva Rajgopal; Robert Uhl; George Vrana INTRODUCTION he Financial Accounting Standards Committee of the American Accounting Association (the Committee) is charged with responding to requests for comment from standard setters on issues related to financial reporting. This paper summarizes the Committee’s response to the Financial Accounting Standards Board’s (FASB) exposure draft, ‘‘Accounting for Uncertain Tax Positions: An Interpretation of FASB Statement No. 109’’ (hereafter, the ED). An uncertain tax position is one where some ambiguity exists in tax treatment under the tax code; therefore, an uncertain tax position requires judgment by companies as to whether to recognize any tax benefits or costs, and what amounts to record. According to the ED, a variety of recognition methods and measurement bases are currently being used to account for uncertain tax positions, resulting in the lack of comparability across companies (paragraph B2).1 The ED defines the recognition (and derecognition) criterion, measurement basis, and disclosure requirements for uncertain tax positions. T The opinions stated in this manuscript reflect the views of the individuals on the Committee and not necessarily those of the American Accounting Association. 1 For example, the ED notes that tax positions are sometimes recognized in the financial statements on an asfiled or to-be-filed tax basis, such that current or deferred tax assets and liabilities are immediately recognized when the related tax position is taken (or anticipated to be taken). The ED also states that some companies recognize uncertain tax positions based on a predetermined threshold of whether the positions would be sustained on audit, and a liability for a contingent loss is recorded when either the threshold is no longer met or it becomes probable a payment would be made to the taxing authority. Submitted: May 2006 Accepted: September 2006 Corresponding author: Hollis A. Skaife Email: hskaife@bus.wisc.edu 103 104 AAA FASC Specifically, the ED requires that an uncertain tax position be recognized when the position is probable of being sustained on an audit by taxing authorities based solely on the technical merits of the position.2 The amount reported is equal to the best estimate of the amount that is probable of being sustained upon audit by the taxing authority, including final resolution of any related litigation or appeals process. Individual tax positions that fail to meet the probable recognition threshold will generally result in either (1) a reduction in the deferred tax asset or an increase in a deferred tax liability or (2) an increase in a liability for income taxes payable or a reduction of an income tax refund receivable. The criterion set out in the ED for derecognition of an uncertain tax position differs from that required for recognition. An uncertain tax position must be derecognized in the period in which it becomes more likely than not that the tax position would not be sustained on an audit. Required disclosures related to the uncertain tax position are based on the disclosures of a gain or loss contingency within Statement of Financial Accounting Standard (SFAS) No. 5, Accounting for Contingencies. The ED also addresses the accounting for interest and penalties, where firms will be require

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