Thinking beyond uncertain tax positions

Download Thinking beyond uncertain tax positions.

Understanding the potential impact of interest computations and penalties

In the normal course of business, companies often seek to reduce their tax burden and minimize or delay cash outflows for income taxes. For example, they may enter into tax planning transactions, structure their business in a tax-efficient manner, or seek tax-optimized methods of transacting with affiliates and others.

Yet even in the absence of such tax planning activities, the average corporate tax return may include numerous positions that are "uncertain" within the meaning of FIN 48, insofar as the application of the law is unclear. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on its tax return.

Under the Interpretation, the financial statement will reflect expected future tax consequences of such positions, presuming the tax authorities' full knowledge of the position and all relevant facts, but without considering time values. Tax positions also include conclusions that a company is not subject to a jurisdiction's tax and therefore need not file a return.