A Response to the FASB Exposure Draft on Accounting for Uncertain Tax Positions: An Interpretation of FASB Statement No. 109

The 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). 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. There is an extensive literature on how taxes influence firms' financial and operating decisions. Some Committee members believe that the ED takes a step toward increasing the alignment between tax and financial reporting because the criteria for recognizing an asset or liability for financial statement reporting is defined based on the likelihood that the asset or liability will be recognized by tax authorities.