Fixed Assets Tax Book Adjustments for Mergers & Acquisitions | HCL Blogs

Fixed Assets Tax Book Adjustments for Mergers & Acquisitions

Fixed Assets Tax Book Adjustments for Mergers & Acquisitions
June 14, 2021

In my journey of 20 years at Oracle, I have seen various versions of Oracle from nascent technology to cloud with vast improvements over the years. However, there are still certain things which need a unique approach for a solution. One of them is the fixed assets’ tax treatment of companies involved in mergers and acquisitions.

Challenges in the Current Process

Whenever an entity is acquired and Oracle is rolled out to them, the rest of the process and configurations mirrored the existing solution, and there were no complications with that specifically. On fixed assets, however, where multiple tax treatments and statutory reporting requirements are involved, the challenges are quite high. The same challenge exists whenever there are different accounting/tax treatments across countries.

A scalable and effective solution to manage fixed assets tax book adjustments for mergers & acquisitions entities is the need of the hour.

When I set out to find solutions to this dilemma, the journey was quite challenging, but it gave a lot of perspectives on tax treatments, mainly on making it simple and effective for the customers.

In the current world, whenever fixed assets are migrated for the acquired companies, few things did matter like the acquisition date, acquisition cost, and their depreciation reserve. These are different between the acquired and the parent company. Problems do arise whenever there are huge numbers of fixed assets of the acquired entity, as handling them between multiple tax books are still a challenge.

Solution Criteria and Options

We started working on the possible options and solutions, which could effectively resolve the challenges. The basic solution criteria should be as such that users need to provide only the asset numbers and that the rest of the solution be simple and scalable without taking much of the user’s efforts. With this approach, once the user provides the details in the template, the adjustments will be loaded into the system. The solution is effective since it satisfies all the solution criteria and is scalable across countries where localization differs.

Success Stories

We have deployed the above solution across entities and projects. For the Brazil rollout for an existing US-based automotive customer, the same solution was reused without any changes and the CORP book/tax book requirements were fully met based on the their respective GAAP. The key point is the scalability where, without any change, the solution can be deployed. For the current project, we have deployed this solution as part of the Finland, Mexico, and France rollouts where there are differences between the US GAAP and the local GAAP.

The Next Steps

The current solution will be improved to convert the template into a user-loadable Excel template without any technical intervention. This will enhance the user experience and make the entire process more efficient.