Whenever companies restructure to increase financial, tax or operating efficiency or adapt to new market dynamics, the changes often involve creating new or transferring existing tax or legal entities. Restructuring includes numerous tax and accounting complexities, many of which impact financial reporting. Areas for judgment only further increase in situations when the restructuring spans multiple legal and tax jurisdictions. Identifying restructuring issues early and assembling the right team to address them can make all the difference to your deal.
Restructuring can be associated with many different corporate events, including:
Legal entity restructuring can be very beneficial in achieving the following objectives:
Although transactions vary, almost every transaction — from acquisitions, to divestitures, to Up-C IPOs — will have overlapping tax, treasury, statutory, and consolidated accounting implications (see diagram). Cross-border transactions are further complicated by the jurisdictional nature of tax laws, foreign currency considerations and local GAAP requirements.
Many developments resulting from restructuring can create challenges and judgments that could impact financial reporting, such as:
Also, reorganizations often involve detailed transaction step plans, which require a careful evaluation of the accounting implications. Some plans can include hundreds or more transaction steps that need to be closely evaluated.
Restructuring takes many forms, but a couple of examples help illustrate some of the issues companies need to identify and address:
These examples illustrate a few of the issues that can arise during restructuring. Our Capital Markets and Accounting Advisory Service (CMAAS) specialists can help you navigate many types of restructuring transactions, including:
An early, cross-functional approach can yield significant benefits, including:
Contact your PwC advisor to discuss the details of your transaction.
“Observations from the front lines” provides PwC’s insight on current economic issues, our perspective regarding the financial reporting complexities, and what companies should be thinking about to effectively address those issues. For more information, visit www.pwc.com/us/cmaas.
Partner, Managing Director, Capital Markets Accounting and Advisory Services, PwC US