Challenges and Solutions
Introductions
Jay Turchin, Director – Tax Process &Technology – McGladrey – New York, NY
Julia Summerville, Director – Tax Process &Technology – McGladrey – Charlotte, NC Panel:
Deborah Larke, General Manager – TaxSystems, Process & Controls, Duke Energy
Matthew Wagenmaker, Director, TaxesMergers, Acquisitions and Dispositions
Economic downturn and subsequent recoveryhas resulted in an uptick in mergers and acquisition activity
Impact on the tax department (in order ofmagnitude)
•
People•
Data•
TechnologyExample Company A Company B Financial Services 5 person tax department Financial - SAP Provision – • OneSource Tax Provision Compliance – OneSource Income Tax Manufacturer 20 person tax department Financial – Oracle, Hyperion, HFM Provision – • Excel Compliance – CorpTax Acquires Divergent companies, systems and processes
Think Critically
What
QUESTIONS
need to be answered? What are the
intended and unintended CONSEQUENCES of the alternatives? What CONCEPTS
will help make sense of the situation? What ALTERNATIVES might we pursue? What ISSUE are we trying to resolve? What does this
look like from another POINT OF VIEW? What ASSUMPTIONS are we making? Adaptive Strategies 2010
Assumptions Exercise
LES SON MAN ECT OBJ AGEAssumptions 1 – What assumptions did you make?
LESSON MANAGE
OBJECT
Rearrange the tiles to spell three familiar words LIA EEF AMI RDS RWO THR
What assumptions did I break?
THREEFAMILIARWORDS
People Challenges
What can we say here…Uncertainty
Companies typically reduce headcount as aresult of a merger, acquisition or disposition
-
This can be a major challenge for the acquiringcompany, especially if integration is delayed
Which tax department is the “surviving” taxdepartment – who is the new head of tax
-
This is not always the head of the acquiring company
System administrators are key to the ongoingData Challenges
How will the financial reporting system beimpacted?
-
Will they be integrated?
All other sources of data – domestic & foreign
Depth of Integration?-
One surviving general ledger system-
What about major sub-systems – inventory, accounts receivable or payable?
Timing of IntegrationTechnology Challenges
System by system, which one will survive?- Detailed review of different systems
- One (Corptax, OneSource) implementation does not equal another
- May have the same technology but may be implemented differently
Compliance considerations- Short period returns, state filings
Data Warehouse- Does either company have one?
Document ManagementProcess Challenges
Some tax departments are more compliancefocused than provision focused (Tax Life Cycle focused?)
Size and breadth of tax departments
Does the tax department have full ownership ofthe provision process or is the finance group also involved
Consider the timing of activities – annually andInternational Aspects
Knowledge base of international operations-
Outside preparers-
Provision knowledge-
Transition – Integration teams-
Ongoing training
Geography and language challenges
Technology – Financial reporting systems
GAAP to STAT versus STAT to TAX adjustments
People – turnoverOther tax types and systems
Sales and use tax-
This one can be major – accounts receivable and compliance impact-
One (Vertex,Sabrix) implementation does not equal another
Unclaimed property-
For some industries this is a major headache
Annual reports and miscellaneous franchise taxfilings
Best Practices Recommendations
Planning and Communication
Tax department participates on the front end – duediligence for acquisition
Tax department involved in the integration of thefinancial reporting systems for the acquisition – will drive timing and availability of information
Communicate to management the tax technologyimpacts of the acquisition – don’t wait for someone to ask you
Best Practices Recommendations
Technology
Which technologies will survive – don’t assume acquiring company has better systems, may be able to leverage from acquired company technologies
Prepare a matrix of all tax technologies for all tax types for both acquiring and acquired company
Address FAS 109 reporting – this includes impact of changes to federal state liabilities resulting fromacquisition – impact on tax attributes, tax adjustments (such as Sec. 199) and credit calculations and for state “instant unity” and consolidated filings
Best Practices Recommendations
Relationship
Work closely with the acquired companies taxdepartment and tax providers – meet with them in person, the stronger the relationship the better integration.
Take the time to understand the acquiredcompanies process – listen and share with them how you do things
Power comes from being understood.SM
When you trust the advice you’re getting, you know your next move is the right move. That’s what you can expect from McGladrey. That’s the power of being understood.
Julia Summerville – [email protected] 704-206-7216 Jay Turchin – [email protected] 212-372-1980
www.mcgladrey.com
McGladrey is the brand under which RSM McGladrey, Inc. and McGladrey & Pullen, LLP serve clients’ business needs. The two firms operate as separate legal entities in an alternative practice structure. McGladrey & Pullen is a licensed CPA firm providing assurance services. RSM McGladrey provides tax and consulting services.
RSM McGladrey, Inc. and McGladrey & Pullen, LLP are members of RSM International (“RSMI”). RSM International is the sixth largest network of independent accounting, tax and consulting firms.
The member firms of RSMI collaborate to provide services to global clients, but are separate and distinct legal entities which cannot obligate each other. Each member firm is responsible only for their own acts and omissions, and not those of any other party.
McGladrey, the McGladrey signature, The McGladrey Classic logo, The power of being understood,
Power comes from being understood and Experience the power of being understood are trademarks of
RSM McGladrey, Inc. and McGladrey & Pullen, LLP.
