The income tax provision

Introduction

After many months of operating in an economic environment reshaped by a global pandemic, companies continue to adjust to the impact on their business and their people. Finance and tax departments shifted gears swiftly to prepare (and timely file) financial statements while working from home when many states/countries issued stay-at-home orders. Even before the challenges of working remotely, Chief Tax Officers often faced difficulties getting the income tax provision right because of inherent tax accounting complexities. Income taxes have consistently been one of the top reasons for financial statement restatements and frequently cited as a cause for material weaknesses. The risk of getting the income tax provision wrong has been amplified not only by economic conditions, but also by disruptions to the traditional ways people do their work. Nevertheless, the accuracy of financial statements remains a priority, now balanced with unforeseen working environments. While no one could have imagined what has transpired in 2020, it is amazing how companies and successful leaders have responded to the challenges of COVID-19 to help their business and their people adapt.

In this thoughtware, we take a closer look at the issues impacting companies ability to “get the income tax provision right”; the critical importance of effective communications; and finally, what the “new normal” might look like.

Operating in the current landscape

• Pressure on timelines
• Working in a remote environment
• Impact on internal controls

Technical matters

• Forecasting
• Realizability of deferred tax assets
• Tax law changes and guidance
• Uncertainties
• Planning for cash

Communicating with stakeholders

• C-Suite
• Audit committees

Communication with external auditors

Regulator expectations

Moving to a new normal