The Accounting Review Vol. 85 No. 5 2010

FIN 48 and Tax Compliance

Lillian F. Mills¹; Leslie A. Robinson²; Richard C. Sansing³

¹ The University of Texas at Austin · ² Dartmouth College · ³ Dartmouth College and CentER Tilburg University

Abstract

We develop a model to examine the effects of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), on the strategic interaction between publicly traded corporate taxpayers and the government. Several of our findings contradict conjectures voiced by members of the business community regarding the economic effects of implementing FIN 48. Specifically, taxpayers with strong facts obtain higher expected payoffs from uncertain tax benefits and some disclosed liabilities understate the expected tax liability. Consistent with the common conjectures, however, some taxpayers are more likely to be audited or are deterred from entering into transactions that generate uncertain tax benefits because of FIN 48.

DOI

10.2308/accr.2010.85.5.1721

Volume

85

Issue

5

Pages

1721-1742

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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