Deferred tax uncertainty refers to the uncertainties involving deferred tax items. Companies will often take aggressive positions regarding the amount of tax expense they have to pay and/or the amount of tax benefit they are receiving. These uncertain tax positions is the result of unclear tax law or because the company believes that the risk of audit firms discovering them is low.
If the tax obligation was probable and the amount can be reasonably estimated, then the company would recognize a tax liability; otherwise, only a footnote disclosure, if any, would be provided. Other companies use a more conservative approach of “more likely than not". Because of the difference in treating the uncertainties, the Financial Accounting Standards Board {FASB) issued in 2006 Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes” to standardize the accounting for uncertain tax positions (now covered in FASB ASC 740).