Proposed delay in mandatory implementation of FAS No. 96.

Proposed Delay in Mandatory Implementation of FAS No. 96

November 8, 1989

On October 6, 1989, the Financial Accounting Standards Board agreed to propose a one-year delay in the mandatory implementation of Financial Accounting Statement No. 96 (relating to accounting for income taxes). On November 9, Tax Executives Institute endorsed the FASB's action. The Institute's submission was prepared under the aegis of the Federal Tax Committee, whose chair is Lester D. Ezrati.

On behalf of Tax Executives Institute, Inc. (TEI), I am writing to support delaying the mandatory implementation of Financial Accounting Standard No. 96, relating to accounting for income taxes. The Statement is currently effective for fiscal years beginning after December 15, 1989. On October 6, 1989, the Board agreed to propose a one-year delay in the mandatory implementation of Statement No. 96. The Board also said it will pursue amendments to reduce the rule's complexities, especially with respect to scheduling and consideration of tax-planning strategies.

Background

TEI is the principal association of corporate tax executives in North America. Our approximately 4,300 members represent more than 2,000 of the leading corporations in the United States and Canada. TEI represents a cross-section of the business community, and is dedicated to the development and effective implementation of sound tax and accounting policies.

TEI members are responsible for, or assist in, the determination of the tax provision included in their companies' financial statements; they are vitally interested in Statement No. 96, which addresses financial accounting and reporting for the effects of income taxes that result from an enterprise's activities during the current and preceding years. Thus, they are intimately involved in, and have first-hand knowledge of, the challenges posed by the implementation of Statement 96.

Administrative Burdens Posed by Statement No. 96

The Board is well aware of the tremendous administrative burdens posed by the new accounting standard. That awareness, however, has only come with time; we suggest that neither the Board nor the large majority of companies subject to FASB's rules fully appreciated in advance the cost and time required to implement Statement No. 96. Indeed, without regard to their understanding of conceptual underpinnings of the new standard, even highly sophisticated companies could not have been prepared for the myriad complexities and subtleties (especially in respect of scheduling and the treatment of tax-planning strategies) -- the unanswered questions -- that they have become aware of only as they struggle to implement Statement No. 96.

We further suggest that, even assuming all the implementation issues are resolved, many companies would encounter substantial problems in endeavoring to implement the standard by the end of the first quarter of 1990. That numerous implementation questions remain open two years after the issuance of Statement No. 96 (and months after the release of the staff's extensive "questions and answers") only confirms the data collection and analysis challenge confronting companies.

Recommendation

TEI recommends that the mandatory implementation of Statement No. 96 be delayed until companies, their shareholders, and their auditors have had adequate time to consider any further guidance provided by the FASB staff. A delay would also afford the Board itself an opportunity to consider how to mitigate the substantial burdens posed by the Statement's provisions relating to scheduling and tax-planning strategies, as well as whether Statement No. 96 should be the only acceptable means of presenting financial information. Thus, we endorse the issuance of a Statement of Financial Accounting Standards delaying the mandatory implementation of the new standard for an additional year.