Fin 48 – a backdoor to tax risk exposure?

In commenting upon the upcoming EU decision concerning Microsoft’s past monopolistic practices, Mary Jo Foley has attracted a predictable amount of hate mail. Buried among the comments was this rather tasty snippet from mighetto:

A little know accounting rule is now being applied to companies like Microsoft. It is called Fin 48 and it basically requires disclosure of the amount of money a US based firm puts aside to cover aggressive tax positions. Out of country investors do not want Microsoft to bay any US tax and pressure is applied so that this is so. I suspect Microsoft has about 20 billion set asside:>)

The person is referring to an interpretation of FASB Statement No. 109. I’m no expert on US standards but reading through the interpretation suggests there is some validity in this person’s comments though oif course life is never that simple. According to a note issued by PwC:

There remain strong underlying themes on the concerns and difficulties that the new interpretation has led to. These include the transfer pricing arena, disclosure requirements surrounding EU court cases, tax authority attitudes and the general disclosure requirement themselves.

My interpreation: How do we get around this one folks?

Though I’m sure he’s already on the case, this also sounds like a fruitful avenue of pursuit for folk like Richard Murphy.

On Microsoft, the last I heard, they’ve ‘saved’ $400 million in taxes bottled up via offshore entities.

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