Financial Reporting for Taxes
Hot Topics in Income Tax Accounting
Tax Executive Institute
February 27, 2013
Jenny Chan – Deloitte Tax LLP
Christina Edwall – Deloitte Tax LLP
Patrice Mano – Deloitte Tax LLP
Kathleen McEligot – Deloitte Tax LLP
Agenda
Topic
Interim accounting
Subsequent events
Errors vs. changes in estimate
Accounting changes & error corrections
Material weaknesses & restatements
Disclosures and SEC comment letters
Legislative and regulatory update
Financial statement impact of the American Taxpayer Relief
Act of 2012
EITF update
Status of IFRS in the U.S.
Questions & Contacts
1
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Interim accounting
Interim reporting – considerations
When does it matter?
• At the end of each interim period when a company
computes its interim tax provision amounts
What matters?
• Whether the item is included in the annual forecasted ETR
or is treated as an item discrete to the period during each
interim period when a company computes its tax provision
Why does it matter?
• To correctly state the Company’s interim tax provision
based on a proper application of the GAAP guidance
3
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Interim reporting – overview
• Each interim period treated as a separate accounting period
• At the end of each interim period, the company:
– Estimates the annual effective tax rate (“AETR”) it expects for the
year using the most current information at that time
– Determines which items of income or expense occurring during the
interim period should be treated as discrete (and excluded from the
AETR)
• AETR excludes “tax related to significant unusual or extraordinary
items that will be separately reported or reported net of their related tax”
[ASC 740-270-30-8]
– ”Extraordinary” does not refer to “extraordinary” as defined under
ASC 225 which are excluded from the AETR and are recorded net of
tax (extraordinary in this context means unusual, infrequently
occurring items, discontinued operations, and extraordinary items)
4
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Interim reporting – AETR v. discrete items
Annual effective tax rate ("AETR")
• Estimated AETR is applied to YTD “ordinary” income/loss at the end of each
interim period and the interim tax provision is the difference between this
computation and amounts reported for previous interim periods
[ASC 740-270-35-4]
• Any valuation allowance required for deductible temporary differences and
carryforwards originating in the current year should be included in the AETR
[ASC 740-270-30-7]
Discrete items
• Discrete items are those items that are not part of the AETR calculation, often
relating to changes to items recorded in a prior period [ASC 740-270-35-6]
• Any change in judgment related to the beginning of the year balance of a
valuation allowance is recognized as a discrete item as of date determined
circumstances changed [ASC 740-270-25-7]
• Any impact from a change in the tax law or rates is recognized as a discrete
item as of the enactment date [ASC 740-270-25-6]
5
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Interim reporting – AETR v. discrete items
(cont’d)
• Annual effective tax rate
includes (not limited to):
- Expected permanent
differences
- Tax credits
- Foreign tax rates
- Capital gain rates
- Changes in valuation
allowances related to
originating temporary
differences and carryforwards
- Effects of changes in tax law or
tax rates enacted during the
period on the current payable
• Discrete items include (not
limited to):
- Effect of changes in tax law or
tax rates enacted during the
period on deferred taxes
- Closing of tax authority
examinations
- Changes in valuation
allowances related to prior year
temporary differences and
carryforwards
- Return-to-accrual adjustments
- Changes in unrecognized tax
benefits
6
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Example 1 – tax law changes
Facts
• Statutory tax rate is 30%
• As of December 31, 20X2, a calendar year-end company recorded a
DTA of $300 for a $1,000 liability that is deductible when paid, and a
DTA for $90 for a $300 accumulated hedging loss recorded in other
comprehensive income ("OCI")
• During Q2 (May 20X3), legislation is enacted increasing the statutory
tax rate to 40% for the entire 20X3 year and subsequent years
• On the enactment date, the balance sheet liability associated with the
DTA was $900, and the accumulated hedging loss recorded in OCI was
$500
Question
• Is the impact of the tax law change recorded through the AETR or
discretely?
7
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Example 1 – answer
Liability – Originated
through continuing ops
1/1/X3
Change in
balance
before
enactment
Impact of
enactment
on DTA
Impact of
enactment
on Current
Payable
Liability
1,000
(100)
900
(100)
Tax rate
30%
30%
{a} 10%
{a} 10%
DTA or current payable
300
(30)
90
(10)
Discrete or AETR?
N/A
AETR
Discrete
{b} AETR
Intraperiod allocation
N/A
Continuing
ops
Continuing
ops
Continuing
ops
{a} Tax rate differential between old tax rate (30%) and newly enacted tax rate (40%)
{b} Adjust the AETR in the period of enactment
8
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Example 1 – answer (cont’d)
Accumulated hedging loss
– originated through OCI
Accumulated hedging loss
1/1/X3
Change in
balance
before
enactment
Impact of
enactment
on DTA
Impact of
enactment
on Current
Payable
300
200
500
N/A
30%
30%
{a} 10%
N/A
90
60
50
N/A
Discrete or AETR?
N/A
Discrete
Discrete
N/A
Intraperiod allocation
N/A
OCI
Continuing
ops
N/A
Tax rate
DTA
{a} Tax rate differential between old tax rate (30%) and newly enacted tax rate (40%)
9
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Example 2 – pending close of IRS exam
Facts
• At the end of Q1 20X9, Company receives what the IRS says is the
final IDR (i.e., information document request) related to a three-year
audit cycle (20X5-20X7)
• Management has suggested it is appropriate to reduce the tax reserve
for this audit cycle by one-half (based on progress of the audit to date)
• Management proposes such amount be included in the projected AETR
Question
• Can the Company reduce the reserve by the proposed one-half?
• Is it possible to reduce the reserve by some other amount?
• If appropriate to adjust, should the reduction be included in the AETR?
10
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Example 2 – answer
• It is unlikely the reserve should be reduced by one-half
• Based on recent SEC comment letters, identifiable events are required
to release reserves, which appears absent in this instance
• Companies should not “bake in” to reserves any type of “detection
probability” (as such, changing the assessment of risk detection cannot
lead to a revised reserve)
• If the facts had been different and the IRS closed the audit (i.e.,
effectively settled), the reduction in the reserve would be based on an
identifiable event and treated as a discrete item in the quarter the
settlement was reached with the IRS
11
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Example 3 – tax return in progress
Facts
• While the Q2 20X3 tax provision is being prepared, the Company’s
20X2 income tax return is being prepared
• The return is approximately 80% complete
Question
• With respect to the income tax return, what should be considered in
connection with preparing the Q2 tax provision?
12
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Example 3 – answer
• Any information relevant to computing the return-to-accrual adjustment
should be considered while preparing the tax provision
• For example, if there are changes from the original tax provision that
are now known, they may need to be considered in the quarterly tax
provision calculations in the quarter such facts become known
• If information that impacts the tax provision is known prior to filing the
income tax return, any adjustment that impacts the tax provision and is
known prior to filing the income tax return should be made when known
(it is not appropriate to wait for the return to be filed)
13
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Example 4 – tax return in progress
Facts
• Assume the same facts as Question 3
• After additional inquiries, the following additional facts are
– Credits have been finalized
– Certain permanent items have been modified
– Prior year taxes were underestimated by $300k, which, when added
to the current projection of current year tax, increases AETR by 2%
– Management proposes to adjust the AETR by this 2%
Question
• Can the Company adjust the AETR by this 2%?
14
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Example 4 – answer
• The tax impact of the permanent items (i.e., return to accrual
adjustments) should be recorded since they are known and it would not
be appropriate to wait until Q3 or Q4
• Corrections for prior year cannot be included in AETR
– While ASC 740 rejected a balance sheet approach to interim tax
provisions in favor of an AETR approach, the balance sheet at the
end of Q2 includes errors now known to have existed as of the end
of the prior year
– To not record the true-up on a discrete basis would be to report a
balance sheet that is known to be wrong in terms of total tax
balances; the adjustment must be discrete to the quarter
• With respect to the adjustments, the Company must determine if such
adjustments are an error or a change in estimate
• If the adjustment is an error, the Company should determine whether it
is material to the prior year or the prior year quarters
15
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Example 5 – new facts become known
Facts
• During the course of calculating the Q2 20X3 tax provision, additional
facts become known:
– IRS challenged certain aspects of the R&D credit for the previous audit cycle
(exposure of $3M for which no amount has been accrued)
– The IRS's challenge of the Company's R&D credit is related to a court
decision concluded in Q2 which is unfavorable to company’s position
– Same issue exists for the current year estimate of R&D credit (annual
amount used for Q1 appears overstated by $500K)
– Company plans to continue to contest the IRS findings but does not believe
the issue will be resolved favorably
Question
• How do the additional facts impact Q2?
16
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Example 5 – answer
• The $3M not previously accrued for the previous audit cycle is treated
as a discrete adjustment and is not included in the AETR
• The $500K related to the current year is included in the forecasted
AETR used to determine the interim tax provision
– Additional exposure in Q2 is the result of the unfavorable court
decision and the AETR is revised in Q2 to incorporate the $500K
adjustment for the current year position
– Taxing authority’s challenge to the position doesn’t change the
previous MLTN conclusion in the prior year and in Q1 (so it's not an
error)
17
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Examples of rate vs. discrete
Discrete
Rate
Discrete
Rate
Return-to-accrual adjustment to the tax accounts for the prior year
return
Adjustment to the current period rate related to information learned from
filing prior year return
Adjustment to UTB reserve specific to prior tax years
Accrual of UTB related to current year items
Discrete
Accrual of interest related to prior year tax contingencies if classified as
a component of tax expense. Interest should be recognized over time
as incurred.
Discrete
Accrual of penalty for prior year tax contingency
Discrete
/ Rate
Adjustment of current year rate to incorporate changes in law or rate –
discrete to period that includes enactment, accrued by application of
new ETR to year-to-date pre-tax income
18
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Examples of valuation allowance items
Rate
Valuation allowance required for deferred tax assets originating in the
current year
Discrete
Valuation allowance required for deferred tax assets existing as of the
beginning of the annual period
Rate
Valuation allowance release related to expected use of previously valued
attributes based on current year income (assuming the current year
income allowing the use of the valuation allowance is income from
continuing operations)
Discrete
Valuation allowance release related to expected use of previously valued
attributes based on current year income other than continuing operations
Discrete
Valuation allowance release related to expected use of previously valued
attributes in future periods
19
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SEC comments – Interim items
We note that the balance of the current and non-current portion of deferred
income tax assets remained unchanged from year-end April 30, 2009 to
quarter-end October 31, 2009. Tell whether you perform an analysis of your
current and long-term deferred income tax assets during the interim periods
and specifically address how you considered the guidance in ASC 740-270 in
accounting for your interim period taxes.
We note that in providing the income tax reconciliation required by
paragraph 740-10-50-12 that you disclose certain non-GAAP measures
such as your estimated annual income tax benefit rate excluding the impact
of your restructuring costs for fiscal 2009. Please revise your future filings to
present and disclose only U.S. GAAP measures within your financial statements or
notes to the financial statements. Refer to the guidance in Item 10(e)(1)(ii)(c) of
Regulation S-K.
20
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Subsequent events
Subsequent events
• ASC 855, Subsequent Events, prescribes the accounting
requirements for two types of subsequent events: (1) recognized
subsequent events which constitute additional evidence of
conditions that existed as of the balance sheet date and that
require adjustment of previously unissued financial statements,
and (2) nonrecognized subsequent events, which constitute
evidence of conditions that did not exist as of the balance sheet
date but arose after that date and require disclosure only
• Under ASC 740-10-25-14 and 25-15, an entity should not
consider new information that was received after the balance
sheet date, but that is not available as of the balance sheet,
when evaluating a tax position as of the balance sheet date (i.e.,
new facts and circumstances)
22
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Subsequent events: tax positions examples
Example 1
As of the balance sheet date, an entity
believes that it is more likely than not that a
tax position will be sustained. Before the
financial statements are issued or available
to be issued, management becomes aware
of a recent court ruling that occurred after
the balance sheet date and that disallowed
a similar tax position taken by another
taxpayer.
Because the court ruling occurred after the
balance sheet date, the entity should reflect
any change in its assessment of recognition
and measurement that resulted from the
new information in the first interim period
after the balance sheet date.
Example 2
Assume that (1) an entity finalizes a tax
litigation settlement with the taxing authority
after the balance sheet date but before its
financial statements are issued or available
to be issued and (2) the events that gave
rise to the litigation had taken place before
the balance sheet date.
The entity should not adjust its financial
statements to reflect the subsequent
settlement; however, the entity should
disclose, in the notes to the financial
statements, the settlement and its effect on
the financial statements.
The information that gave rise
to the change was obtained
when the litigation was
finalized, i.e., the decision is
the new information.
23
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Subsequent events: valuation allowance
examples
Example 1
As of the balance sheet date, an entity
believes that it is MLTN that its capital
loss C/F DTA will not be realized due to
uncertainty with respect to its ability to
generate capital gains. After the balance
sheet date, but before the financial
statements are issued or available to be
issued, the entity recognizes a capital
gain that is available to realize the capital
loss (confirms unrealized gain that existed
at balance sheet date).
Example 2
Company P has recorded a VA against its
net DTAs as it is MLTN that the net DTAs
will not be realized. Subsequent to the
balance sheet date but prior to the
issuance of its financial statements,
Company P acquires Company S which
has historically been profitable. As a
result of the acquisition, Company P
expects to realize a portion of its DTAs
through the filing of consolidated tax
returns with Company S.
All available evidence should be
considered when assessing the need for
a VA at the balance sheet date; the gain
inherent in the asset as of the balance
sheet date should be considered when
determining whether it is MLTN that the
capital loss C/F DTA will be realized.
Under ASC 855, a business combination
that occurs after the balance sheet date
but before the issuance of the financial
statements is a nonrecognized
subsequent event.
24
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AETR and nonrecognized subsequent
events
• Question
– Should the AETR include events that occurred after the interim balancesheet date but before the financial statements are issued (i.e., a
nonrecognized subsequent event as contemplated in ASC 855)?
• Answer*
– There are potentially two acceptable approaches (accounting policy):
• Approach 1 — AETR should be based on information available up to the
date on which financial statements are issued, with certain exceptions
(e.g., changes in tax laws and rates, events affecting the recognition and
measurement of tax positions, etc.), even though that information might
include factors that did not exist or were not relevant until after the
interim balance sheet date.
• Approach 2 — The effects of a nonrecognized subsequent event should
not be reflected in the AETR (other than disclosure if significant).
25
*Different views may exist, please consult with your attest provider
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Errors vs. changes in estimate
Accounting
changes & error
corrections
Definitions in ASC 250-10-20
• Change in accounting estimate
– “A change that has the effect of adjusting the carrying amount of an existing
asset or liability or altering the subsequent accounting for existing or future
assets or liabilities. A change in accounting estimate is a necessary
consequence of the assessment, in conjunction with the periodic
presentation of financial statements, of the present status and expected
future benefits and obligations associated with assets and
liabilities. Changes in accounting estimates result from new information.”
• Error in previously issued financial statements
– “An error in recognition, measurement, presentation, or disclosure in
financial statements resulting from mathematical mistakes, mistakes in the
application of generally accepted accounting principles (GAAP), or oversight
or misuse of facts that existed at the time the financial statements were
prepared. A change from an accounting principle that is not generally
accepted to one that is generally accepted is a correction of an error.”
28
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How/when to record?
• Change in accounting estimate
– “A change in accounting estimate shall be accounted for in the
period of change if the change affects that period only or in the
period of change and future periods if the change affects both. A
change in accounting estimate shall not be accounted for by
restating or retrospectively adjusting amounts reported in financial
statements of prior periods or by reporting pro forma amounts for
prior periods.” [ASC 250-10-45-17]
• Error in previously issued financial statements
– “Any error in the financial statements of a prior period discovered
after the financial statements are issued or are available to be
issued, shall be reported as an error correction, by restating the
prior-period financial statements.” [ASC 250-10-45-23]
– Need to consider materiality
29
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Example 6
• Facts
– Company A invests in various partnerships that generate tax credits
– Company A is not the tax matters partner and will not receive a K-1
showing the actual amount of credits it is entitled to use on its tax
return until after its annual report is released
– Company A estimated credits of $1M, based on the prior year K-1,
when it determined amounts to include in its financial statements
– When the final K-1 was received by Company A, it reflected tax
credits of $1.1M
– Company A records a $100K benefit in the subsequent year's
financial statements
• Question
– Is this a change in estimate or an error?
30
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Example 6 (cont’d)
• Answer: It depends
– Error
• The adjustment resulted
from later identification of
information that (1) was
reasonably “knowable” at
the original balance sheet
date and/or (2) was the
result of a flawed process
• Materiality of the error and
implications on internal
controls should be
assessed
– Change in estimate
• The adjustment resulted
from later identification of
information that (1) was not
reasonably “knowable” at
the original balance sheet
date and (2) was not the
result of a flawed process
– Estimation process should
be sufficiently robust to result
in an estimate that is
reasonably expected not to
be materially different from
the actual amount
31
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Example 7
• Facts
– Company B has many foreign subsidiaries with Subpart F income
– Company B estimates this amount at the end of 20X1, but does not
know the final number until it prepares the U.S. information returns
for its subsidiaries (Form 5471s) after issuing its consolidated
financial statements
– When estimating Subpart F income to prepare its consolidated
financial statements, Company B takes several shortcuts; it does a
more precise calculation when preparing the Form 5471s (Q3 of
20X2)
– Company B records the difference between estimates used for its
20X1 provision and the actual amounts known in 20X2 after filing its
20X1 return as an out-of-period adjustment during Q3 of 20X2
• Question
– Is this a change in estimate or an error?
32
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Example 7 (cont'd)
• Answer: Error
– An adjustment that arose from information that (1) was reasonably
“knowable” at the original balance sheet date and/or (2) was the
result of shortcuts taken during provision preparation
– Materiality of the error and implications on internal controls should be
assessed
33
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Example 8
• Facts
– During the previous three years, Company C was a profitable
company with expenses that qualified for research and development
credits (R&D)
– Due to resource constraints, Company C did not claim an R&D
credit, but planned to amend its tax returns at a later time
– In 20X1, the Company begins to determine the amount of R&D
credits it is entitled to for 20X1 and the previous three years, but
doesn't complete the project or file the refund claims until after the
20X1 financial statements are issued in early 20X2
– Company C records the benefit related to the 20X1 and previous
three years credits in 20X2
• Question
– Is this a change in estimate or an error?
34
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Example 8 (cont'd)
• Answer: Error
– An adjustment that arose from information that (1) was reasonably
“knowable” at the original balance sheet date(s) and/or (2) was the
result of a flawed process would be considered an error
– Materiality of the error and implications on internal controls should be
assessed
35
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Example 9
• Facts
– In fiscal 20X1 Company D employed a new tax director who
reevaluated all unrecognized tax benefits previously recorded by the
company
– The new tax director determined that an unrecognized tax benefit for
which a liability was previously recorded met the threshold of morelikely-than-not based on a case ruling in a prior year (the new tax
director was aware of this from past experience)
• Question
– Is this a change in estimate or an error?
36
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Example 9 (cont'd)
• Answer: Error
– An adjustment that arose from information that (1) was reasonably
“knowable” at the original balance sheet date and/or (2) was the
result of a flawed process would be considered an error
– The change was based on information that was available in a
previous financial reporting period (although it was not identified by
previous management)
– Materiality of the error and implications on internal controls should be
assessed
– “Subsequent changes in judgment that lead to changes in
recognition shall result from the evaluation of new information and
not from a new evaluation or new interpretation by management of
information that was available in a previous financial reporting
period.” (ASC 740‐10‐25‐14)
37
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Example 10
• Facts
– Company E identifies the following differences between its 20X1
provision and tax return during its 20X1 return to accrual
reconciliation process conducted in the third quarter of 20X2:
• $4M of benefit related to a domestic production activities
deduction (IRC section 199) that was not computed and recorded
in the 20X1 financial statements but was claimed on the 20X1 tax
return
• Unfavorable permanent differences for meals and entertainment,
incentive stock compensation, and penalties for $2M, $1M, and
$1M, respectively
– The above identified differences net to zero
• Question
– Is this a change in estimate or an error?
38
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Example 10 (cont'd)
• Answer: It depends
– Though the adjustments net to zero, they would need to be assessed
individually to determine whether they represent an error versus a
change in estimate
– The individual adjustments would be considered changes in
estimate if the adjustments resulted from later identification of
information that (1) was not reasonably “knowable” at the original
balance sheet date and (2) was not the result of a flawed process
• Estimation process should be sufficiently robust to result in an
estimate that is reasonably expected not to be materially different
from the actual amount
– The individual adjustments would be considered errors if they arose
from information that (1) was reasonably “knowable” at the original
balance sheet date and/or (2) was the result of a flawed process
– Materiality of any errors and implications on internal controls should
be assessed
39
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Example 11
• Facts
– Company F is a real estate company
– In 2X10, F sold certain properties and realized significant gains
– In calculating its federal income tax provision and tax return, F
erroneously double-counted certain costs, thereby reducing its tax
liability
– Later, during an IRS audit, the IRS has proposed significant
adjustments to F's 2X10 tax return related to the overstated
deduction of costs which will materially impact F's financial
statements
• Question
– Is this a change in estimate or an error?
40
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Example 11 (cont'd)
• Answer: Error
– An adjustment to the prior-period amounts that results from
mathematical mistakes would be considered an error
– Materiality of the error and implications on internal controls should be
assessed
41
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Change in estimate versus error — take
aways
• Not every “true up” is an error – focus on facts and
circumstances leading to the change
– Was there new information received after the balance sheet date that
led to the change?
– Ask questions; what did we know and when did we know it?
• Consult early (e.g., CFO, Audit Committee, CAO, attest firm)
– A high level of management judgment is needed in evaluating errors
vs. changes in estimate
• When an error is identified, determine the root cause
– Was there a control breakdown that allowed the error to occur?
– Determine impact on the effectiveness of internal controls
• Document analysis and conclusions contemporaneously
42
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Material
weaknesses &
restatements
Overview
• While material weaknesses and restatements are on the decline
overall, accounting for income taxes continues to be a challenge
• Regulators, too, are focused on this area
– Accounting for income taxes continues to be on the SEC’s agenda
when discussing critical matters and is one of the top areas of focus
in its reviews of public company financial statement filings
– In late 2011, the Associate Chief Accountant, SEC’s Division of
Corporation Finance, noted that the SEC staff has continued to focus
on evaluating registrants’ assertions that the internal controls of a
foreign operation are effective*
* Source: 2011 AICPA National Conference on SEC and PCAOB Developments
44
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Guidance
• Material weakness
– Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5
defines a material weakness: “A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis.”
• Restatement
– SEC Staff Accounting Bulletin (SAB) Topic 1M provides guidance on assessing
materiality and includes examples of situations in which a quantitatively small
misstatement might actually be considered material (e.g., if the misstatement masks a
change in earnings or other trends; hides a failure to meet analyst consensus
expectations; concerns a significant segment or portion of the company’s business;
has the effect of increasing management’s compensation; involves concealment of an
unlawful transaction)
– The SAB topic also presents the SEC’s staff view that each misstatement must be
considered separately and then aggregated with other misstatements when
determining whether adjustments are required
45
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If a company has one, does it automatically
have the other?
• It depends on the underlying facts and circumstances
– The existence of a material weakness is not restricted to situations in which
a restatement occurs but rather depends only on the reasonable possibility
of a material misstatement
– On the other hand, pursuant to the PCAOB and SEC guidance, the
restatement of previously issued financial statements is an indicator of a
material weakness
• Recently, the Chief Auditor of the PCAOB observed that disclosures of
material weaknesses should be a “leading indicator” of potential financial
reporting problems and that “material weaknesses seem to be reported,
generally, only in connection with a restatement – where the material
weakness is often obvious”*
• More often than not, when company management is reassessing their
evaluation of internal control over financial reporting during their
restatement process, they realize that a material weakness likely existed
before the restatement as well
46 * Source: 2010 AICPA National Conference on SEC and PCAOB Developments
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Tax-related material weaknesses and
restatements
SeniorWeaknesses
Manager
Material
Improper
Treatment /
Recording
14%
Senior
Manager
Restatements
Non-routine
Transactions
3%
Lack of
Period End
Documentation
Process
7%
3%
Valuation
Allowances/
NOLs
20%
Foreign Taxes
4% State Taxes
5%
Acquisition/
Disposal
5%
Inadequate
Reconciliation
3%
General
Procedure /
Process
16%
Uncertain
Tax
Positions
4%
Systems /
Technology
2%
Other
16%
Personnel
(lack of / not
trained)
15%
Lack of
Review
21%
Deferred
Taxes
34%
Other
12%
Accounting for
Income Tax
(General)
16%
Material weaknesses and restatements in SEC filings from 1/1/11 – 12/31/11
47
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Material weakness
Example disclosure 1
Based on our evaluation under the framework in Internal Control-Integrated
Framework, our management concluded that our internal controls over financial
reporting were ineffective as of December 31, 20XX, based on a material
weakness identified by management as a result of the inclusion of certain net
operating loss carry forwards related to the 20XX tax year reflected in our 20XX
tax return (prepared by external advisors) relied on by us in connection with the
preparation of the third quarter 20XX tax provision that, based on new information,
were subsequently determined to be currently unsupportable. The material
weakness led to a misstatement of noncash tax expense included in the tax
provision for the three and nine months ended September 30, 20XX. The resulting
offsetting adjustment was credited to additional paid-in capital, not taxes payable,
and accordingly, does not reflect cash taxes payable. No financial statements prior
to the financial statements for the quarterly period ended September 30, 20XX
were affected by the issue described above.
48
Source: Material weaknesses in SEC filings from 1/1/11 – 12/31/11
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Material weakness (cont’d)
Example disclosure 1 (cont’d)
The Company is implementing enhancements to its internal controls over financial
reporting to provide reasonable assurance that errors and control deficiencies in
its accounting for income taxes will not recur. These steps include continuing and
increased use of third party advisors with expertise in income taxes to assist us
with our quarterly and annual income tax provision and increased detail in our
tracking, documentation and reconciliation process related to our deferred tax
assets.
We anticipate the actions described above and resulting improvements in controls
will strengthen our internal control over financial reporting and will address the
related material weakness that was identified as of December 31, 20XX. Our
management will monitor the effectiveness of our changed process on a quarterly
basis and as part of our 20XX assessment of internal control over financial
reporting, our management will test and evaluate these additional controls to
assess whether they are operating effectively
49
Source: Material weaknesses in SEC filings from 1/1/11 – 12/31/11
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Material weakness
Example disclosure 2
Specifically, we determined that the following internal control
deficiencies when considered in the aggregate constitute a
material weakness in internal control over financial reporting
related to accounting for income taxes.
• The assessment of the impact of certain non-routine transactions
on the accuracy of our year-end income tax provision was not
effective.
• Tax resources were not sufficient to effectively prepare and
review the analysis of tax accounts.
• Communication between the tax department and the Controller
organization was not effective to ensure income tax accounting
consequences were adequately considered.
50
Source: Material weaknesses in SEC filings from 1/1/11 – 12/31/11
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Material weakness (cont’d)
Example disclosure 2 (cont’d)
Management believes the measures described below will
remediate the identified control deficiencies and enhance our
internal controls over financial reporting:
• Increase tax department resources to ensure completion and
documentation of a more thorough analysis that supports our
calculation of the effective tax rate and valuation of deferred tax
assets and liabilities.
• Implement formal periodic meetings among the Chief Financial
Officer, Controller and the tax department to ensure adequate
consideration of items that may impact income tax accounting.
51
Source: Material weaknesses in SEC filings from 1/1/11 – 12/31/11
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Restatements
Example disclosure 1
The restatement is necessitated by the Company’s
determination that positive evidence available at year end
20XX was not sufficient to overcome the negative evidence
around the deferred tax assets and to justify not booking a
valuation allowance against federal income tax assets and
foreign tax credits. The expected impact will be to increase
the valuation allowance by $x million, and to increase the net
loss from operations accordingly.
52
Source: Restatements in SEC filings from 1/1/11 – 12/31/11
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Restatements (cont’d)
Example disclosure 2
The Company has identified certain errors in its previously
issued financial statements resulting in the following
adjustments for the year ended June 30, 20XX:
State taxes due to the State of Domicile of the Company for
prior periods had not been accrued. Taxes, interest and
penalties in the amount of $x due as of June 30, 20XX have
been recorded on these revised financial statements,
resulting in an increase in expenses in the amount of $x for
the year ended June 30, 20XX and a decrease in retained
earnings in the amount of $x as of June 30, 20XX.
53
Source: Restatements in SEC filings from 1/1/11 – 12/31/11
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Challenges
Risk management
Cost containment
• Keeping up to date with legal and
regulatory changes
• Inability to increase headcount to
cover increased workload
• Coordinated management of global
activities
• Expectation for tax executives to
manage the global cost of tax
services, even when costs are not
in the budget
• Demand for transparency by
investors and shareholders
• Increased focus on financial
reporting
• Access to proper knowledge and
skills to comply with tax
requirements in each jurisdiction,
including adjustments from U.S.
GAAP to local GAAP
• Insufficient information on internal
and external activities
• Lack of information on scope of
services provided for specific fees
• Lack of visibility regarding fees
charged for tax services
54
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Assessing operational risk
Area
Operational control assessment
General
• How do you manage tax risk, compliance, and reporting outside the United States?
How much visibility do you have and how much do you want?
Tax
compliance
• In what significant areas is management relying on external service providers to
supplement the limitations of in-house resources: Who makes provider decisions?
• Who is responsible for tax compliance in each jurisdiction? Are tax returns filed
timely and accurately?
• How do you monitor tax payments made by foreign affiliates?
Tax
accounting
• Are you confident in the provision data you receive from foreign affiliates? How do
you gain that confidence?
• Do you track the return-to-provision reconciliations in foreign jurisdictions?
• How do you track significant tax planning projects, acquisitions, and other
transactions around the world?
• How much visibility do you have regarding positions taken for tax returns filed
outside the United States?
Tax risk and
controversy
• What is the role of the tax department in the risk management program?
• Is the tax function suitably staffed, and are the reporting lines appropriate?
• How do you track tax audit activity outside the United States? Are there concerns
about whether the right resources are handling these audits?
55
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Leading practices
• Increased visibility, transparency and control over
global compliance and reporting
• Flexibility to increase use of in-house resources,
respond to shifting priorities and the ability to provide
experience and knowledge at the global and local level
• Integration and efficiency to control costs, increase
accuracy, decrease risk and to respond to regulatory
changes
• A path to improvement without the introduction of
significant risks
• Insight into the business to make informed strategic
business decisions
56
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Disclosures and SEC comment
letters
ASC 740 – relevant accounting literature
Disclosures [ASC 740-10-50]
740-10-50-2
Components of the net deferred tax asset or liability
740-10-50-3
Certain carryforwards and certain valuation allowances
740-10-50-9
Components of income tax expense (continuing operations)
740-10-50-10
Income tax expense or benefit allocated to continuing operations and
separately allocated to other items
740-10-50-12 Rate reconciliation (public enterprise)
740-10-50-17 Certain disclosures for members of a consolidated group
740-30-50
Undistributed earning of subsidiaries and corporate joint ventures
Interim Reporting Disclosures [ASC 740-270-50]
740-270-50-1
Reasons for significant variations in customary relationships between
income tax expense and pretax accounting income
58
Copyright © 2013 Deloitte Development LLC. All rights reserved.
ASC 740 – other disclosure requirements
Uncertain Tax Benefits (UTBs) Related Disclosures [ASC 740-10-50-15]
740-10-50-15A (a)
Tabular reconciliation of UTBs at the beginning and end of the year
(public companies)
740-10-50-15A (b)
Amount of UTBs that would impact the effective tax rate (public
companies)
740-10-50-15 (c)
Amount of interest and penalties recognized in the income statement
and balance sheet
740-10-50-15 (d)
Amount of UTBs that may significantly change within 12 months of
the reporting date (“early warning disclosure”)
740-10-50-15 (e)
Description of open tax years by major jurisdiction
740-10-50-19
Policy on classification of interest and penalties
59
Copyright © 2013 Deloitte Development LLC. All rights reserved.
MD&A disclosures – SEC interpretation
Commission guidance regarding management’s discussion and analysis
of financial condition and results of operations
MD&A should be a discussion and analysis of a
company’s business as seen through the eyes of
those who manage that business. Management has a
unique perspective on its business that only it can present. As
such, MD&A should not be a recitation of financial statements
in narrative form or an otherwise uninformative series of
technical responses to MD&A requirements, neither of which
provides this important management perspective.
60
Copyright © 2013 Deloitte Development LLC. All rights reserved.
MD&A disclosures – SEC interpretation
Other information in documents containing audited financial statement
The auditor’s responsibility with respect to information
in a document does not extend beyond the financial
information identified in his report, and the auditor has
no obligation to perform any procedures to corroborate other
information contained in a document. However, he should read
the other information and consider whether such information,
or the manner of its presentation, is materially inconsistent with
information, or the manner of its presentation, appearing in the
financial statements.
61
Copyright © 2013 Deloitte Development LLC. All rights reserved.
MD&A disclosures – SEC recent discussions
At the 2009 AICPA National Conference on Current SEC and PCAOB
Developments, SEC discussed income tax disclosures and MD&A:
• Registrants should consider income tax footnote disclosure when
writing MD&A, not just a simple year-to-year comparison of income
statement amounts
• Reminded registrants that Regulation S-X, Rule 4-08(h), requires
separate disclosure of all significant reconciling items in the rate
reconciliation and significant amounts should not be combined in an
“other” category
• Staff reviews sufficiency of MD&A based on a “mix of information” from
the footnote disclosure and rate reconciliation
• Nonrecurring nature of items in rate reconciliation (e.g., changes in
uncertain tax positions) lends itself to MD&A disclosure
62
Copyright © 2013 Deloitte Development LLC. All rights reserved.
SEC comments – areas of focus*
• Recognition of valuation allowances
– SEC staff has difficulty accepting losses incurred during the economic
downturn as “aberrations.”
– Cumulative losses represent significant negative evidence that is difficult to
overcome.
• Reversal of valuation allowances
– Consider the following factors as part of reversal analysis:
• The magnitude and duration of past losses and current profitability
• Changes that affect past losses and current profitability
– Objectively verifiable evidence carries more weight than evidence that is not.
– Consider sustainability of profitability
– Historical accuracy of forecasting future results
• Financial statement disclosures
– Why now
– Comprehensive analysis of all available positive and negative evidence
– How the entity weighed each piece of evidence in its assessment
63
* Source: 2012 AICPA National Conference on SEC and PCAOB Developments
Copyright © 2013 Deloitte Development LLC. All rights reserved.
SEC comments – areas of focus*
• Foreign private issuers (issuing financial statements
under IFRS)
– SEC staff requested additional disclosure on the following
items:
• The nature of the items disclosed within the rate reconciliation
• Year over year changes in tax rates
• Deferred tax assets that were not recognized as well as additional
information regarding those that were
• Whether unrecognized deferred tax assets were evaluated at the
end of the year
64
* Source: 2012 AICPA National Conference on SEC and PCAOB Developments
Copyright © 2013 Deloitte Development LLC. All rights reserved.
SEC comments – areas of focus
• UTB items
– ASC 740-10-50-15 disclosures
– Interest and penalty presentation policy disclosures
– Basis for recording changes
• IRS examinations
• Interim items
65
Copyright © 2013 Deloitte Development LLC. All rights reserved.
SEC comments – areas of focus (cont’d)
• Other
– Rate reconciliation items
– Deferred tax assets and liabilities
– Timing of reversals
– Expiration of NOLs in various jurisdictions
– Contractual obligations table
– Critical accounting policies and material assumptions
– Consistency of APB 23 assertion (undistributed earnings of
foreign subsidiaries)
66
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Examples – SEC comments
Valuation allowance — basis for not having a VA
In light of the negative trends in your results of
operations in 2008 and 2009, in future filings please
expand the discussion of your rationale regarding the
recoverability of net deferred tax assets to provide a balanced
discussion of all of the significant positive and negative factors
management considered in concluding that net deferred tax
assets are more likely that not recoverable. Also, clarify how
you weighted and evaluated the factors you cite. To the extent
realization of net deferred tax assets is dependent on tax
planning strategies or non-routine transactions, please
disclose and describe.
67
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Examples – SEC comments (cont’d)
Valuation allowance — consistency with other
information
We note that your valuation allowance is less than 1% of your
deferred tax assets. In addition:
• You state on page 35 that you expect lower future revenue,
• Your independent auditors issued a going concern opinion,
• Your credit ratings have been downgraded,
• You expect future non-compliance with debt covenants,
• You impaired all of your goodwill as well as other assets, etc.
As such, tell us and disclose in detail why you believe it is more likely than
not that most of your deferred tax assets will be realized. Disclose if there are
indications that the valuation allowance will change in the near term due to
one or more future events and the nature of the uncertainty and a range of
possible outcomes. In addition, please describe how you will realize your
deferred tax assets. Describe the business development risks, specific tax
planning strategies and other factors that lead to your conclusion.
68
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Examples – SEC comments (cont’d)
UTB — ASC 740-10-50-15 disclosures
Please tell us why you have not made disclosure about uncertain
income tax positions under FIN 48. If you believe you have no
uncertain income tax positions, please confirm. Please note that
FIN 48 applies to taxes based on income (as defined in paragraphs
3 and 4 of SFAS 109) in all taxing jurisdictions.
UTB — basis for recording changes
Please clarify the nature of the reductions to the liability for
unrecognized tax benefits for fiscal 2008. If it represents
settlements or lapse of statute of limitations reductions, indicate
such in the disclosure. Refer to paragraphs 21a.(3) and (4) of FIN 48.
69
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Examples – SEC comments (cont’d)
IRS examinations
We note from your risk factor on page 30 that you could be liable
for up to $57 million of additional taxes as the result of recent IRS
audits. Please disclose this contingent liability, and if any portion
of it has been accrued. In addition, please tell us the basis for your
accounting treatment.
70
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Loss Contingencies (ASC 450)
• July 2010 – FASB exposure draft released
– Expands disclosure of loss contingencies
• July 2012 – FASB removed loss project from its
agenda
– Removal of project not expected to affect the frequency or
types of SEC comments
• Disclosure of risks should be specific rather than generic
• Providing “early warning disclosures” throughout the evolution of
matters
• Reasonably possible range of loss
• Improving clarity of disclosures
• Timing of loss recognition
71
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Loss Contingencies (ASC 450) (cont’d)
• December 2012 AICPA annual conference on current
SEC and PCAOB developments – staff observed:
– Because a high degree of professional judgment is required in
recognizing loss contingencies, entities should clearly disclose
the full “story” related to the loss contingencies
– Loss contingencies should be continually evaluated over time
as facts and circumstances change
72
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Legislative and regulatory
update
Financial statement
impact of the
American Taxpayer
Relief Act of 2012
Changes in tax law — Calendar year end
companies
12/31/2012
year end
The Act
Enacted
1/2/2013
12/31/2013
year end
Q1
When to
recognize
Disclosure only
Measurement
Intraperiod
Recognize through
allocation of tax
continuing ops
effects of
changes
Q2
adjust tax
accounts
Q3
Q4
continue to reflect tax law change
use temporary difference and
current taxable income on
enactment date
Follow normal intraperiod allocation rules
75
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Changes in tax law — Interim reporting
Relevant to fiscal year end companies
• Interim reporting considerations
– The tax effect of a change in tax laws or rates on deferred
taxes and prior year taxes should be recognized discretely in
the interim period of enactment
– When retroactive legislation is enacted before the fourth
quarter, the effect on the current annual accounting period
should generally be recognized by updating the AETR and
applying the updated AETR to year to date ordinary income
through the end of the interim period that includes the
enactment date. This effectively "catches up" the year to date
tax on ordinary income in the period of enactment
76
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Interim — Research and experimentation
tax credit
Example Company A:
• Fiscal year ending 9/30
• R&E Credit which expired 12/31/2011 extended
through 12/31/2013 enacted on 1/2/2013
1/2/13
9/30/12
12/31/2011
3/31/2012
Q2
6/30/2012
Q3
9/30/13
12/31/2012
Q4
Q1
3/31/2013
Q2
6/30/2013
Q4
Q3
$200 R&E credit
$500 R&E credit
Now allowed for prior year
Projected for current year
77
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Interim — Research and experimentation
tax credit (cont’d)
Q1
Q2
Q3
Q4
FYE 9/30/13 AETR:
Profit before tax (PBT)
1,000
3,000
2,000
1,000
Estimated annual PBT {a}
7,000
7,000
7,000
7,000
40%
40%
40%
40%
2,800
2,800
2,800
2,800
N/A
(500)
(500)
(500)
2,800
2,300
2,300
2,300
AETR = {b} ÷ {a}
40%
32.86%
32.86%
32.86%
Q1 tax expense
400
Tax rate
Estimated annual tax before
credits
FYE 13 R&E Credit
Estimated annual tax {b}
78
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Interim — Research and experimentation
tax credit (cont.)
Q2
FYE 9/30/13 Q2 Tax Expense:
Q2 PBT {a}
3,000
YTD PBT
4,000
Revised AETR
32.86%
YTD tax before discrete items
1,314
Less: Q1 YTD tax
(400)
Q2 tax before discrete items
Tax law change — PY R&E credit
914
(200)
Q2 tax expense {b}
714
Q2 ETR = {b} ÷ {a}
23.81%
79
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Subsequent events disclosure
• To keep the financial statements from being
misleading, it may be necessary to disclose information
about a nonrecognized subsequent event, such as a
tax law change occurring subsequent to the reporting
date
• In these situations, ASC 855-10-50-2 requires financial
statement disclosure of:
– The nature of the event
– An estimate of its financial effect or a statement that such an
estimate cannot be made
80
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Discussion in MD&A
• SEC registrants should consider including in
Management's Discussion and Analysis:
– Discussion of the anticipated future impact of the Act on the
entity's
•
•
•
•
Results of operations
Financial position
Liquidity
Capital resources
– Discussion in the critical accounting estimates section to the
extent the changes could materially impact existing
assumptions used in making estimates of financial statement
amounts
81
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Other financial statement implications
• Investments in foreign subsidiaries
– Change in current payable for Subpart F inclusion
– Change in deferred tax liability for anticipated reversal of
outside basis difference due to lapse of look-thru rule and
active financing exception
•
•
•
•
•
•
•
Valuation allowance
State tax implications
Balance sheet classification
Subsequent event disclosure
Non-income taxes
Prior year true-up
Other
82
Copyright © 2013 Deloitte Development LLC. All rights reserved.
EITF update
Gross vs. net presentation of a UTB when
an NOL or credit carryforward exists
• Issue 13-C discussed at January 17, 2013 EITF
meeting
– Currently diversity in practice exists regarding gross vs. net
presentation of an unrecognized tax benefit when net
operating losses or credit carryforwards are available to offset
the liability
– The EITF reached a consensus-for-exposure indicating that
an unrecognized tax benefit should be presented on a net
basis when the UTP would, or is available to, reduce the NOL
or credit carryforward under the provisions of the law
– Retroactive application is anticipated
– The effective date will be discussed at a future meeting
– The FASB unanimously approved the consensus-for-exposure
at its January 31, 2013 meeting
84
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Example 12
The uncertain tax position
created or increased an NOL
in Year 1
NOLs and UTBs
• Assume a U.S. enterprise has a Year 1 loss for tax purposes of $5,000 which
includes a $1,000 uncertain tax position
• The enterprise records a deferred tax asset for an NOL carryforward of $2,000
based on a 40% tax rate
• The uncertain tax position does not meet the MLTN recognition threshold which
results in a $400 UTB liability
How is the UTB liability be presented on the balance sheet?
• Present a deferred tax asset of $1,600 in the balance sheet (“net”)
85
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Example 12 (cont’d)
NOLs and UTBs
Year 2 uncertain tax position
did not create or increase an NOL
• Assume the same enterprise has Year 2 net income before taxes of $2,000,
including an $800 uncertain tax position
• Tax position does not meet MLTN recognition threshold; $320 UTB
• Taxable income must be reduced by available NOL carryforwards/backs
How is the unrecognized tax benefit presented?
• View 1 (“net method”)– Present a $480 DTA ($1,200 tax-effected NOL carryforward
per tax return less $320 UTB above and Y1 $400 UTB in Example 2)
• View 2 (“gross method”)– Present both (1) the $800 DTA ($1,200 tax-effected NOL
carryforward per tax return less Y1 $400 UTB) and (2) the $320 Y2 UTB
• This view will be retroactively eliminated upon final ASU guidance being
issued
Note: Under the gross display, only UTBs that directly contribute to NOL(s) are netted.
Otherwise, shown as a liability.
86
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Accounting for investment tax credits
• Issue 13-B added to the EITF agenda in November
2012 and is scheduled for discussion at the March
2013 EITF meeting
– Currently two methods exist to account for investment tax
credits
• Deferral
• Flow-through
– EITF to revisit these methods at the March 2013 meeting
87
Copyright © 2013 Deloitte Development LLC. All rights reserved.
FASB income tax standard chosen for
post-implementation review
• On February 4, 2013 the Financial Accounting
Foundation announced that ASC 740 will be subject to
post-implementation review
– Designed to monitor and address problems that arise after
application of newer accounting standards issued by the board
– ASC 740 was selected because it was a significant change in
the accounting for income taxes (when FAS 109 was originally
adopted in 1993) and affected a wide range of organizations
– Stakeholders have indicated that the FASB guidance and
information disclosed to investors related to income tax could
be improved
88
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Status of IFRS in
the U.S.
Worldwide IFRS adoption map (for public
companies)
Canada
2009*/2011
Europe
2005
United States
TBD
Japan
2010*/2016 ?
China
2007
India
2011
Mexico
2012
Brazil
2010
Australia
2005
Adopted or will adopt
Developing plans to adopt
Argentina
2012
South Africa
2005
No plans or unknown
* Early adopters
Global use — Used in over 110 countries by more than 40% of the Global Fortune 500
• Current: European Union (EU) countries, Hong Kong, Australia, New Zealand, Canada, Brazil and many Middle East and South American
countries and Japan early adopters
• Future: Argentina and Mexico (2012)
• Proposed: U.S. mandatory TBD (may provide early adoption), Japan based on regulatory roadmaps
90
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Progress on IFRS work plan
July 2012 – SEC Issues Final Report on Incorporation of IFRS
• Still no decision as to whether IFRSs should be incorporated into the financial
reporting system for U.S. Companies or how it should be incorporated
• Development of IFRS
• Governance of the IASB
• Interpretive process
• Status of funding
• IASB’s use of national standard setters
• Investor understanding
• Global application and enforcement
• Several significant themes were identified that require further analysis
• SEC welcomes feedback on the report, but did not set a specific comment
deadline
December 2012 AICPA annual conference on current SEC and
PCAOB developments
• Paul Beswick, then acting chief accountant in the SEC’s Office of the Chief
Accountant, did not indicate when a final decision would be made, but noted
that the staff will work with the new SEC chairman to determine the path
forward.
91
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Questions?
Speaker — Jenny Chan
Jenny has more than 12 years of professional experience in public accounting. She
has extensive experience providing services to both public and closely held clients
in the consumer business, retail, technology, and social media sectors. She
specializes in income tax accounting and reporting, federal and multistate corporate
taxation, corporate reorganizations, and accounting periods and methods. She has
also worked in Deloitte’s Special Acquisition Services department for two years
focusing on mergers and acquisitions and tax structuring.
+ 1 415 783 5976
jchan@deloitte.com
93
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Speaker — Christina Edwall
Christina has seven years of public accounting experience and is currently a
manager in the Washington National Tax Accounting for Income Taxes group. Prior
to joining Washington National Tax, Christina started her career in Deloitte’s Bay
Area practice. During her time at Deloitte Christina has provided services to a
diverse client base including high technology, hospitality and consumer business
clients. Additionally, Christina taught accounting for income taxes in the San Jose
State Masters of Taxation program in 2008 and 2009.
Christina received her Bachelors of Science from California Polytechnic State
University, San Luis Obispo and her Masters in Taxation from the University of
Denver. She is a member of the American Institute of Certified Public Accountants
and serves on the Board for Moments of Happiness.
+ 1 415 783 4425
cedwall@deloitte.com
94
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Speaker — Patrice Mano
Patrice Mano is a Washington National Tax Partner co-leading the WNT Accounting
for Income Taxes group. She consults with companies on the application of
accounting standards such as ASC 740 (FAS109 and FIN 48) and IAS 12. Patrice
serves as the National Leader of Internal Training for the National Financial
Accounting & Reporting – Income Taxes Group of Deloitte Tax LLP.
Patrice has been a guest lecturer for various organizations including Tax Executives
Institute, American Institute of Certified Public Accountants, American Bar
Association, Bureau of National Affairs, Practicing Law Institute, and Council on
State Taxation.
Prior to joining Deloitte in 2002, Patrice worked for Arthur Andersen LLP as a
member of the International Tax Group in San Francisco, California and with Grant
Thornton LLP in Utah. Throughout her career, Patrice has served clients in a variety
of industries including financial services, technology, real estate, manufacturing,
retail, hospitality, and private equity.
Patrice received her Bachelors of Science and Masters of Accounting degrees from
Brigham Young University. She is a member of the American Institute of Certified
Public Accountants.
+ 1 415 783 6079
pmano@deloitte.com
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Speaker — Kathleen McEligot
Kathy has over 33 years of professional experience. For most of her career, Kathy
has specialized in corporate taxation, with extensive experience in the financial
services, distribution and retail industries. Kathy has provided services to large and
small clients, as well as public and private corporations.
Kathy is also a firm designated specialist in accounting for income taxes (ASC 740).
She is part of a national team that consults on income tax accounting issues for all
types of companies. Kathy teaches income tax accounting to clients and staff. She
has addressed many different audiences, including the Tax Executives Institute (TEI)
and other industry groups, on current developments in the ASC 740 area.
Patrice received her Bachelors of Science from the University of California,
Berkeley. She is a member of the American Institute of Certified Public Accountants
and California Society of Certified Public Accountants. Kathy is also on the Board of
the San Francisco Opera Guild and Catholic Charities CYO, and is the Treasurer for
the Los Ranchitos Improvement Association
+ 1 415 783 4540
kmceligot@deloitte.com
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This presentation contains general information only and Deloitte is not, by means of this
presentation, rendering accounting, business, financial, investment, legal, tax, or other
professional advice or services. This presentation is not a substitute for such professional advice
or services, nor should it be used as a basis for any decision or action that may affect your
business. Before making any decision or taking any action that may affect your business, you
should consult a qualified professional advisor. Deloitte shall not be responsible for any loss
sustained by any person who relies on this presentation.
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About Deloitte
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member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed
description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about
for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest
clients under the rules and regulations of public accounting.
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Member of Deloitte Touche Tohmatsu Limited