tax authorities. FIN 48 clarifies several aspects of this process: Analysis is at the "unit of account" rather than in aggregate The "more likely than not" standard applies at this level It is presumed that all positions will be examined, and tax authorities will have full knowledge of all relevant information Whether a position can be sustained is based solely on the technical merits of the position The level of detail of the analysis (unit of account) depends on how the business keeps its records, presents its financial statements, and deals with tax authorities. This may vary from business to business, and may change over time. Further, materiality is determined at the unit of account level. One key clarification is the presumption of examination of all positions by knowledgeable tax authorities and a resolution of disputes over those positions solely on the technical merits of each position. All relevant tax law is to be considered for the individual position. Positions that are not technically correct are allowed only where there is widely understood administrative practice allowing the position. Thus, for example, a position would not be acceptable merely because an Internal Revenue Service agent allowed it in a previous year. Measurement If it is more likely than not that a position will be sustained, then the effect of the position must be measured. Measurement is a three-step process: Determine possible outcomes of each position, Determine the likelihood of such outcome, and Determine the outcome that is most favorable with a cumulative likelihood of more than 50%. For example, assume a position exists which is more likely than not to be sustained at least in part. Management determines that it is 25% likely that $100 of benefit will be sustained, and 30% likely that $75 of benefit will be sustained. The business must accrue only $75 of benefit. Positions that are highly certain of full recognition may require very limited analysis. Disclosure In addition to accruing the tax, FIN 48 requires disclosures in footnotes to the financial statements. Year end statements must include: A tabular reconciliation of unrecognized tax benefits, The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate, Total interest and penalties recognized in the analysis, Unrecognized tax benefits that may significantly change within 12 months of the financial statements, and A description of tax years that remain subject to examination, by major