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TAX CLINIC

opportunities, proper application of profiles can be applied to specific time currency translations, so that stakeholders
required and optional provisions of the periods, creating a complete audit trail. can easily understand the dollars and the
tangible property regulations under For example, you may decide to undergo descriptive information at the same time.
Sec. 263(a), and special shorter-life a cost-segregation study or transfer The right people are at the
provisions for certain asset classes assets between tax legal entities through- table at the right time: Although it
(i.e., qualified improvement property out the useful life of the asset. Effective may seem obvious, companies may easily
under Sec. 168(e)(6)). Optimizing pro- dating of the asset classification assigned overlook the critical role that people play
cesses typically involves looking closely (from MM/DD/YYYY through MM/ in making tax technology work. As with
at each step to determine where you can DD/YYYY) or effective dating of any tax technology, proper configuration
glean greater efficiencies through more ownership periods can become a critical of fixed-asset management systems re-
effective use of available technology. piece of metadata that helps you reconcile quires tax technical understanding. Any
Optimal processes minimize manual in- and support changes in your fixed-asset changes contemplated to the fixed-asset
tervention and improve accuracy of data records over the examination period. systems should include the tax depart-
related to any tax calculation based in Last-minute tax extenders are ment as a primary stakeholder and do so
whole or in part on fixed-asset records, captured and implemented: While from the outset.
such as apportionment factors or tan- changes enacted by Congress may gen-
gible real property taxes. This minimizes erate additional work and frustration, Upside potential
the chance of misstated income or prop- especially at the end of the year, your In summary, companies should not allow
erty taxes while maximizing resources. fixed-asset systems need to seamlessly themselves to be precluded from taking
Consider the following indications of handle important retroactive changes to advantage of any tax planning oppor-
an optimal fixed-asset solution: prior-period tax asset records. Business tunity simply because it is a challenge
Standard and customized operations, IT, and tax must work togeth- to adjust their fixed-asset process and
reports have built-in checks and er to ensure that the company can easily technology systems. Rather, they can
balances: Instead of relying on manual take advantage of year-end tax extender implement resilient and sophisticated
processes to tie out fixed-asset costs legislation. Many ERP systems do not fixed-asset processes and technology
and accumulated depreciation between provide timely updates and miss the criti- systems that allow for changes while
the asset roll forward, additions report, cal implementation of new legislation. enabling them to maintain control.
and gain-loss report, each report should Tax adjustment calculations If your company has achieved a basic
include key check figures with variance and supporting information flow level of fixed-asset management but has
flags to identify any exceptions. While directly to related systems: A fully not yet reached the higher efficiencies
verifying that reports tie out is a primary optimized fixed-asset management sys- outlined above, you may wish to ap-
control, reliance on manual effort is not tem delivers required data with minimal proach improvements one at a time or
an effective use of time. Take advantage (preferably zero) manual intervention. conduct a more comprehensive update.
of automation tools wherever possible. Specifically, the fixed and intangible Either way, you will have the benefit of
Customized report capabilities asset tax adjustment calculations and building upon an existing asset manage-
are fully leveraged to fill in data tax form supporting information should ment platform, so there is only upside
gaps: Although it may seem easier to populate the appropriate fields in your potential to be gained.
just create or reformat the fixed-asset tax-compliance and FASB Accounting From Rafael Ferrales, E.A.
records in Microsoft Excel, it generally Standards Codification Topic 740, Income (Ralph.Feralles@rsmus.com), New York;
is not a sustainable long-term solution. Taxes, reporting systems. This important Daniel McGrath (Daniel.McGrath@
For analysis requiring repetitive manual milestone may require custom “data rsmus.com), Chicago; and Elizabeth
manipulation, consider spreadsheet mac- bridges,” depending on your software. Sponsel, CPA (Elizabeth.Sponsel@
ros or an ETL tool that can automate International needs are met: rsmus.com), Minneapolis ■
the tasks. Different jurisdictions handle fixed as-
All tax data profiles have a time sets in different ways. It is important for
dimension: Applying effective dating companies to properly translate intended
principles to your fixed-asset records use and depreciable lives for the appropri- Editor
does not save time during system setup ate taxing authorities. Global companies
or conversions, but it can be a lifesaver should make sure that fixed-asset records Mo Bell-Jacobs, J.D., is a senior
in the event of an audit. With an active are effectively translated into multiple manager with RSM US LLP.
time dimension in place, any changes to languages, with and without foreign

28 April 2023 The Tax Adviser