Income tax accounting

Developing a multi-disciplinary approach to address the complexity of income tax accounting and reporting.

Bridging the needs of multiple income tax stakeholders

Income tax accounting continues to be a "leader in the clubhouse" on lists that no one wants to lead, such as the number of restatements and Sarbanes-Oxley material weaknesses. The topic continues to be a troublesome area for companies of all sizes.

The rules come from multiple sources, including recent changes in accounting and disclosure requirements. (See our In brief.) To "get it right" in this area, companies must seek advice about both financial accounting and technical tax rules. Often, more than one tax professional may need to be consulted to make sure the two areas are covered adequately. Simply put, no transaction is "complete" without comprehensively assessing the income tax accounting guidance.

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What impacts should companies consider?

  • Since income taxes cascade through virtually all transaction-related work streams, communication and coordination among financial reporting and income tax personnel is paramount to successful transaction integration.
  • The ability to forecast a prospective effective tax rate post-acquisition, something considered to be a "must-have" by many tax directors, can be done only with appropriate consideration of the "day one" acquisition accounting impacts of income tax accounting.

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What should companies do?

  • Revisit the income tax accounting rules for business combinations. Even for those who have been active in the M&A space, these rules can prove challenging.
  • Establish a plan on the front end of a transaction. Aim to integrate the acquired business into the company's overall income tax accounting policies and practices. This can been done only with a detailed understanding of the target company's current practices.

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How PwC can help

PwC is a trusted resource for helping companies navigate their income tax reporting challenges. Our knowledge of the taxing authorities’ review processes can help improve your tax reporting and disclosure practices. This support can also help you develop strategies to withstand regulatory scrutiny, anticipate potential areas of focus in future filings and meet constantly evolving expectations for clear and transparent tax reporting.

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Contact us

Henri Leveque
Partner, Deals, Global and US CMAAS Practice Leader
Tel: +1 (678) 419 3100
Email

Paul Sheward
Partner, Deals, U.S. Accounting Advisory Services Leader
Tel: +1 (312) 298 2232
Email