Tax Provisioning: Simplify, Standardize then Automate
By Ndwyouell-Oracle on Feb 13, 2013
Tax provisioning is a process that has become increasingly more complex to perform, but increasingly more important to do well. I recently interviewed Andy Oliver, a PWC Director in their Tax Practice and an expert in Tax Provisioning, in a Podcast which I feel sheds some light on this increasingly complex matter. To listen to the Podcast, click here.
Tax provisioning is the process of reporting current and deferred income taxes in a company’s financial statements – tax on current profits and estimated future tax on future profits. There are a myriad of rules and requirements for calculations and disclosure that apply to different companies and countries and they are changing all the time. It is extremely important to have accurate, transparent calculations as when and what to pay and defer can make a huge difference to a company’s bottom line.
How do most tax accountants and departments manage this process? Andy indicated that a majority of companies pull this information together through numerous and large spreadsheets with complex and convoluted calculations. And although these spreadsheets offer flexibility – to keep up with the ever changing rules – they do not provide consistency in calculations, standardization of the process, or data security. This means that the calculations and resulting reports are error prone and can cause countless hours of work to find and correct the errors.
Ideally, the tax provisioning process should be performed early in the financial close process to get a really good picture of the end result. However, inevitably being early in the process means the financial results will change and the provision or estimation will have to be recalculated. Having the tax provisioning process integrated with the financial close process and systems makes a lot of sense, from an efficiency standpoint, to reduce the amount of work required each time there is a change to the financial results. We also discussed how important it is to SIMPLIFY the tax provisioning process and then standardize and automate the process before integrating with the financial close process to be truly effective and world-class.
Oracle’s Hyperion Tax Provision solution was designed to provide this integration with the financial close process and drive efficiency into the tax provisioning and disclosure process.
Finally, Andy had this advice for the listeners, “If you can align the tax reporting process with the financial close process – eliminating much of the manual, spreadsheet-based calculations, you will get the job done quicker, experience fewer mistakes, and be able to spend more time doing the important part of your job as a tax accountant; analyzing the numbers, and providing insight on the results such as WHY the numbers are different from forecast or from last year.
For more information on the Oracle Hyperion Tax Provision solution, click here.
To listen to the podcast, click here.