A company determines whether to recognize an uncertain tax position by evaluating whether the tax position will
"more likely than not" be upheld during a tax audit by the IRS, based on the technical merits of the position.

Question

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The "more likely than not" threshold, which means a greater than 50% likelihood, is the standard used by companies to determine whether an uncertain tax position can be recognized in the financial statements, according to accounting principles like those outlined in ASC 740 (formerly known as FIN 48). This evaluation is based on the technical merits of the position and whether it would be upheld upon examination by tax authorities such as the IRS.

A Company Determines Whether to Recognize an Uncertain Tax Position