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Income Tax Restatements Second Leading Cause of Financial Restatements

Are you paying enough attention to your company’s income tax provision? Material weaknesses related to ASC 740, Accounting for Income Taxes, are the second leading cause of disclosure in management’s annual report on Internal Controls over Financial Reporting and restatement of financial results, according to the Wall Street Journal CFO.

Insufficient tax accounting expertise and insufficient review are the primary causes of tax-related material weaknesses, according to a study conducted by Deloitte. The challenges in this area are numerous and include in-depth knowledge of financial accounting and tax technical rules.  In addition, certain areas are highly judgmental, requiring the use of estimates and assumptions.

The effects of disclosure or restatement are far reaching and include loss of investor confidence and potential adverse impact on the company’s stock price.  In addition, restatement can be a significant expense and distraction for the company. Williams Cos. restatement of its 2011 financial results for failure to properly account for deferred tax liabilities slashed $500 million of shareholder value.

To find out more about the importance of and potential pitfalls related to accounting for income taxes, download our white paper on ASC 740, “A Closer Look at Accounting for Income Taxes” by Clicking Here..

Or contact Gary Purpura at 203-307-2820 or gpurpura@taxops.com to discuss how TaxOps can assist your company in meeting these complex requirements.