2023 Marcum Year-End Tax Guide

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EFFECTIVE DATE The Board decided that all entities should apply the amendments on a prospective basis, with a retrospective option. The Board decided that the amendments will be effective for public business entities for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. The Board decided that the amendments will be effective for entities other than public business entities for fiscal years beginning after December 15, 2025, and interim periods within fiscal years beginning after December 15, 2026. The Board also decided that early adoption will be permitted. RECEPTION AND RESPONSE The FASB’s changes have been met with mixed reviews. Major financial entities like American Express aired concerns about the frequency of disclosures. Furthermore, 15 Republican House members expressed apprehension that the extensive disclosures might put US multinationals at a disadvantage against foreign counterparts. However, FASB’s Board Chair Richard Jones emphasized the project’s primary aim: “providing investors with essential insights into a multifaceted area.” As we see it, multinational companies will struggle when it comes to gathering the data, transposing the data, and especially communicating with foreign

parties to obtain their data timely. Additionally, companies may lose some of their competitive advantage and face more scrutiny from authorities due to the new information revealed in their financial disclosures. ANALYSIS AND ADAPTATION For businesses, now is the time to take stock of existing methods and make sure they align with the updated standards. If not, there’s still time to make new infrastructure investments. Some challenges you’ll need to meet under the new rules center on: • Scrutiny and Competitive Position: Nuanced disclosures might open companies to undue examination, potentially undermining their competitive standing. • Resource Limitations: Meeting these standards might require recruiting additional personnel and/or revamping existing operations. • Time Considerations: Retroactively applying these changes could lead to the restatement of previous periods, affecting compliance timelines. TECHNOLOGICAL INTEGRATION AND TAX READINESS As reporting expands globally and the amount of additional detail required to be disclosed under the proposed ASU, businesses need to consider using technology to collect and incorporate data into reporting mechanisms to bolster precision and efficiency. Companies will have

to find effective ways to improve their existing tax accounting processes and reduce the risk for the organization by utilizing technology to capture data at its source and directly integrate it into financial reporting systems. Corporate tax departments tend to be small, which makes each team member’s time critical. Based on our observations, many business processes today are primarily driven by the need to find, extract, and manipulate data. Thus, the bulk of the tax practitioner’s day is spent moving data into and out of Excel, manipulating data using human resources, and calculating the income tax disclosure using an Excel format. Technology can take these low-value tasks and leverage tax applications and reporting engines to free up tax personnel to focus on high value “thought-work.” Rather than using the limited tax resources available in-house on low-volume tasks, a company should begin the process of tax automation by automating low-value tasks such as organizing that data to complete one of a number of commonly used calculations and using that calculation to meet a reporting obligation. Effective use of technology can free up tax team members to identify tax opportunities, challenge auditors on issues, or work with business partners to tax-optimize transactions in process. These strategic tasks require real thought from tax personnel with a deep understanding of the tax law and accounting literature.

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