Tax indemnification arrangements: Navigating the financial reporting

December 2010
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Tax indemnification arrangements: Navigating the financial reporting

At a glance

This PwC paper provides a framework for determining the appropriate accounting for an income tax indemnification arrangement.

Income tax indemnifications are established in a variety of transactions, including business acquisitions, corporate spin-offs and initial public offerings (IPOs). Accounting for an income tax indemnification arrangement depends upon whether the company is obligated to the taxing authority, the relationship between the parties and the type of transaction. This paper provides a framework to apply in determining the appropriate accounting.