This finding perhaps indicates that accounting for UTBs before and after FIN 48 was not significantly different.
It analyzed multiple measures of FIN 48's impact over a five-year period and investigated the magnitude and direction of the cumulative effect, relative to key financial measures in the implementation year; how the UTB ending balances behaved over time; how large the UTB changes were from year to year; and the possibility of differences across industries.
It also found that unrecognized tax benefit (UTB) balances, on average, have been slowly rising over time (e.g., UTB balances rose in 2007 for many companies); however, they tend to be small and relatively stable when compared to stockholders' equity and other key financial variables.
* UTB balances and changes to UTB balances were generally small relative to SE, TA and REV, and have been relatively stable over time; however, UTB balances have tended to rise slowly for most companies and changes to the balance have been large for certain companies in some years.
* Although the cumulative effect on companies' SE at the adoption of FIN 48 was generally insignificant (confirming prior studies), there was a large increase in UTB balances from the beginning to the end of 2007 (the first year of implementation for most).
* Annual average decreases to the UTB balance related to prior positions, taken consistently, outweigh the annual average increases related to prior positions, perhaps indicating a systematic overestimation of tax reserves under FIN 48.
EXHIBIT 2 Unrecognized Tax Benefit (UTB) Ending Balances (2007-2011) Relative to Key Financial Variables End End UTB/REV Number of End End ITTB/NI ([double Year Companies UTB/SE UTB/TA * ([dagger]) dagger]) 2007 85 5.4% 1.5% 25.6% 2.7% 2008 100 4.2% 1.6% 48.6% 2.7% 2009 100 5.6% 1.6% 36.1% 3.2% 2010 100 3.3% 1.4% 33.0% 2.9% 2011 100 5.1% 1.3% 27.2% 2.7% Minimum for all years: 3.3% 1.3% 25.6% 2.7% Maximum for all years: 5.6% 1.6% 48.6% 3.2% * TA = total assets ([dagger]) NI = net income; absolute values for NI were used for this variable.
* Differences in UTB balance changes by industry were evident both for individual years (especially 2007) and for average annual changes over the five-year period.
The format and content of UTB disclosures was found to be comparable across companies.
These results suggest that industry differences in UTB balance changes were evident both for individual years (especially 2007) and the five-year period.
Although the yearly UTB balance changes for most companies were modest, several had extremely large percentage changes in UTB; this was particularly true in 2007.