Observations from the front lines provides PwC's insight on current economic issues, our perspective regarding the business impacts, and actions we have seen companies taking to effectively address those issues.
Companies are seeking opportunities for growth and diversification. They are increasingly using cross border M&A activity as a mechanism for becoming established in foreign markets and to stimulate growth. Such activity is expected to increase in 2015, a result of lower foreign tax rates, a strengthening US dollar, US stock market indices reporting record levels and an accumulation of cash by foreign subsidiaries. These trends have afforded companies the opportunity to engage in M&A activity by using the strong US dollar to purchase foreign companies.
The acquisition of a foreign business can introduce complex financial reporting challenges when accounting for income taxes. Pre-acquisition, a company must gain a sufficient understanding of the foreign target’s operations and tax structure in order to know where the acquired assets reside, the relevant taxing jurisdictions, and the applicable tax rates. Post-acquisition issues may arise from internal reorganizations and the need to perform GAAP conversions.