Halliburton Global Tax

Project Request Presentation

Project Phoenix – Discovery PhaseJuly 2008

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Agenda

Overall Objective 5 mins Relevant History – Where we are 5 mins Conclusions Reached 5 mins Where we want to go – Project Phoenix 15 mins

- Vision- Scope- Goals- Project Team- Deliverables- Proposed Timeline- Effort & Cost Estimate

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Current State

Existing data / process problems: Multiple maintenance points supported by manual intervention Outdated and unsupported applications requiring upgrade / replacement Inability to provide timely data required to meet closing schedule Duplicated and overlapping processes performed by segregated groups Extensive data cleansing activities required to produce accurate information

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TaxWire

Provision Processes

Oracle - Hyperion HFM

Talisman

Domestic Deferred TaxesDatabase

Compliance Processes

IRS

SEC

TIS

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Future Vision

Oracle - Hyperion HFM Integrated Tax

System

Integrated Tax Processes

2/1/2008 3/1/2008 4/1/2008 5/1/2008 6/1/2008 7/1/2008 8/1/2008 9/1/2008 10/1/2008 11/1/2008 12/1/2008

Common Timeline

Tax Closing Entries

Integrated Tax People

PBCs

10Q / 10K Disclosures

Tax Returns

Audit Ready Workpapers

RTA

TBBS

Management Reports

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Relevant History and Where We Are

Tax Accounting Department experienced 100% turnover in personnel in 1999

Stealth I - completed in January 2000 as of 12/31/99; true-up related to book/tax basis differences with respect to reserve accounts which are typically reversed for tax purposes

Stealth II - completed in January 2001 as of 12/31/00; further trued-up the book/tax basis differences with respect to the reserve accounts as well as the book/tax basis differences in fixed assets and joint ventures/partnerships

Preparation of Tax Basis Balance Sheets and resulting true-up - completed at end of 2002 as of 12/31/01 for KBR, Landmark, Dresser and ESG business units by Jim Aughinbaugh, Project Director, and Horn Murdock Cole

TaxWire implementation Q1 2003 – used for the preparation of the 2002 Tax Return

The initial load to TIS for book/tax basis differences was intended to be based upon the tax basis balance sheet work and resulting true-up as of 12/31/01

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Relevant History and Where We Are Darrell Simmons and Edwina Lu prepared a true-up during 2004 as of 12/31/03 which

was loaded to TIS.

Significant deficiency Q2 2005

“Project Scrub” performed by Deloitte as of 12/31/04 for selected foreign companies and selected domestic temporary differences, fixed assets, intangible assets, partnerships, joint ventures, revenue recognition and reserves. Initiated in 2005 and completed in 2006. Price tag $2.1 MM

Ernst & Young developed RTP (return to provision) template as a separate TIS module and tested TIS technology enhancements related to system maintenance optimization during spring/summer 2006

Tax Reporting physically moved into the tax department in November 2006 - but consolidated under VP of Tax leadership Q4 2007

Late tax re-class Q2 2007

Implemented CorpTax ETS, Q2 2007, as the single compliance platform (domestic & international of US compliance)

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Relevant History and Where We Are Tax Reporting Remediation project (tactical only) conducted during Q3-Q4

2007 focused on improvements that could be quickly achieved and eliminated some manual tasks - see appendix for more details

Removed significant deficiency Q4 2007

In 2008, reached the conclusion that TIS and the underlying architecture is not a viable / sustainable solution (will not be supported going forward)

Business Objects v 5.1.3 is no longer supported and needs to be replaced

Spring 2008, tax involvement was requested in identifying enhancements to HFM

Spring/summer 2008, identified additional enhancements related to FIT, introduced concept of foreign income tax accounting power users and began preparation for power user training to be held the week of August 25th

Wrapping up A&E Project I – Tax Processes & Controls which assessed current state processes and controls related to Tax Reporting, US Tax, Int’l Tax and Tax Technology (to be completed in July, 2008)

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Conclusions Reached

Tried many approaches – but … - never fixed the underlying processes which create bad data- never implemented sustainable tax basis balance sheets to prove accuracy of

domestic deferred tax balances – will continue to require adjustments every few years

- never adequately addressed resource constraints / turnover- never addressed the commonality across functions- never considered the technology & information requirements of the entire tax

function (provision, compliance, planning, audit defense)

“Silos” of people, processes and technologies did not work- Two distinct groups with separate agendas, varied approaches and technology

solutions to getting to the same information – made business hard to conduct when the functions needed to work together seamlessly in order to manage risk and consume limited resources

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Where we want to go – Project Phoenix

Embrace Management’s Goals Of A “Best In Class” Tax Department:

- Controls Integrated Into Processes

- Strong CFO Support For Tax

- Trusted Business Partners

- Motivated Work Teams

- Tax Risk Management Focus

- Strong Linkage With Accounting

- Immaterial Return To Provision Adjustment

- No Significant Deficiencies

- Seamless Department – No “Silos”

- No P&L Surprises

- One day Tax Close

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Where we want to go – Project Phoenix

Implement “strategic fix” for both Tax Reporting and Tax Compliance – which includes data quality and flow analysis, process redesign, systems reassessment, and personnel alignment

- From source systems• HFM• SAP

- to downstream Tax Reporting and Tax Compliance tools • TaxWire• Data Collection Tool• FIT• Talisman• TIS• CORPTax• Business Objects• DI Tax

Best Practices conclude that Tax Reporting and Tax Compliance functions operate better with less risk when totally integrated – this is in alignment with CFO goals of integrating compliance and provision for 2008 & beyond

Vision is to create a new foundation of capabilities and capacity – 5 “S’s”- One that is flexible – sustainable – fundamentally changes the processes

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Tax Reporting and Tax Compliance want to operate with:

● the same data

● the same tools

● the same people

● the same timelines

● the same processes

Vision – 5 “S’s”

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Project Scope

Planning

Global Reporting

Audit Defense

US Federal Compliance

Not in Current Scope • Foreign Tax Compliance• State Tax Compliance

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Project Scope

- Monthly transaction analysis- Quarterly estimated payment process- US federal tax compliance- Foreign tax credit compliance- Data / Information management

• SAP, HFM, DCT, TaxWire, Talisman modules, TIS, CorpTax, DI Tax, FIT, Business Objects

- Global - Foreign - Domestic accrual- PBC preparation- FIN 48 compliance- ETR forecasting- 10Q / 10K disclosure- Return to accrual- Preparation of tax basis balance sheets- Self audit adjustments / amended returns- Audit results pushback into reporting and compliance

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Goals – Data

- Use dual purpose data in real time mode

- Fully leverage Talisman as the single source for common law legal entity, tax legal entity and company codes

• Eliminate duplication of entity maintenance across multiple tools (Talisman, TaxWire, TIS and CorpTax)

- Prepare common work-papers and supporting information – avoid dual sources or duplication of documentation efforts

- Eliminate manually supported data transfer processes

- Control data entry with validation

- Include a controlled workspace for further data transformation

- Reduce occurrences of data loading failures

- Eliminate manual data cleansing

- Reduce validation effort – incorporate review by exception and automated error handling techniques

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Goals – Tools

- Use dual purpose tools- Consolidate tools used for global, foreign and domestic accrual- Eliminate reliance on manually prepared spreadsheets to calculate and

support journal entries- Eliminate reliance on MS Access database for domestic deferred

reporting purposes- Eliminate manual rollforward of tax entries ± $5 million- Streamline account and rule maintenance and validation across multiple

tools• Eliminate duplication of account and rule maintenance across multiple tools

(TaxWire, TIS and CorpTax)

- Leverage effective dating techniques to provide real-time analysis of changes to hierarchy structure or other tax attributes

- Auto populate reconciliations and identify variances- Include robust reporting capabilities to see the information from various

dimensions

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Goals – People

- Provide more rewarding and motivating place to work

- Enable and develop resources to participate in both reporting and compliance activities

- Share skills, institutional knowledge and experience between Tax Reporting and Tax Compliance

- Increase ability to collaborate on tasks

- Emphasize analysis and decision support skills over data gathering and preparation skills

- Reduce training costs and ease transitions

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Goals – Timelines

- Integrate timelines to meet reporting and compliance deadlines

- Eliminate incidents of timing problems identified in the data loading processes which leads to higher rejection rates

- Reduce occurrences of crisis management

- Increase flexibility in the timelines – easier to adapt to business changes or new regulations

- Increase visibility of overall timelines and schedules so that entire department can monitor and plan

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Goals – Processes

- Use dual purpose automated processes in real time

- Embed risk based management into process redesigns

- Automate preparation of return to accrual reconciliations

- Automate preparation of tax basis balance sheets

- Produce audit ready results (internal and external)

- Design integrated process controls which automatically provide SOX compliance substantiation

- Automate monitoring and increase visibility of process status with alerts / notifications

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Project Team

Business Owners

Business Lead

Brent SavageVP of Tax

Executive Sponsor

Business Analysts

Technology Leads

Daniel GarciaProject Owner

Project Team – Project Phoenix

Elizabeth Sponsel(SCH)

Steering Committee – Project Phoenix

Gary Tyler - IT

Randall Miller

Sara Sykes

Robert WilsonDirector of Tax

Compliance & Audit

Mark PurnellDirector of Global

Services

Lyn BeatyInternal Audit

Kevin Shea – Talisman

Mohamed El Shenawy – Tax(SCH)

Hal IT tbd – Halliburton Tax

Technology Analysts

Tanya Weisinger – Tax

Hal IT tbd – Hal IT

Shelly Longhorn(SCH)

Anne Martin(SCH)

Competency Leaders

Carl Gibbs

Tracy Howell

Project Manager

Randy Phillips

Gary Sella

Darrell Simmons

Tax Subject Matter Experts

Accounting Subject Matter Experts

Dale French

Susan Wilrodt

Audit Subject Matter Expert

TBD

Marcia Trimble

Quality Assurance

Scribe

Karen Long(SCH)

TBD

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Deliverables

Business and technical requirements Design of how the solution would work

- Business model of the new processes, tools, controls, data flows, timelines and personnel alignment

- Technical design & specifications

Benefits analysis Cost estimate Timeline projection Draft project plan

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Project Phoenix – Discovery Phase Timeline

Start Finish Weeks

Phase ILaunch 7/14 8/12 4Business Requirements & Solution 7/25 9/8 6

Total 8 weeks elapsed

Phase IITechnology Requirements & Solution 9/8 10/8 4.5Software & Hardware Selection 10/8 12/8 8Execution Phase Plan 12/8 1/26 7Wrap Up & QA 1/26 1/29 .5

Total 20 weeks elapsed

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Effort & Cost Estimates

Hours Cost

HAL IT 2,400 $317,000

HAL Tax & Accounting 2,330 $233,000

SCH 1,700 $454,000

Total 6,400 $1,004,000

Best estimate based on current facts

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Appendices Index

Tax Reporting Remediation & Other Accomplishments Tax Reporting Remediation & Other - Original Plan of Attack & Prioritization FIT 2008 Proposed Changes Team Roles Pre-requisites

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Team Roles Executive Sponsor – is responsible for providing overall direction and support,

including such things as:- provide vision, objectives and scope decisions- provide funding and commit resources- plan for and measure success- hold the project team accountable to delivering promised value- eliminate or moderate risks to the project’s success

Steering Committee Members - assists the Executive Sponsor in reviewing and approving plans, deliverables, results and monitoring risks. As significant stakeholders the Steering Committee Members are responsible for:- communicating key A&E initiative and project messages to their group (SMEs

and non SMEs)- ensuring quality of SME contributions- ensuring timeliness / priority of SME commitments and- managing their group’s acceptance of project outcomes and future

performance

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Team Roles (cont.) Project Owner - is responsible for ensuring that the Executive Sponsor’s mission,

visions, objectives and goals are transformed into department-wide projects and that the Executive Sponsor’s intentions are translated into actions. The project owner is responsible for ensuring that the project is successful, properly managed and meets all business requirements, project controls, methodologies, processes and procedures.

Project Manager – is responsible for the planning, execution, and closing of the project. Key project management responsibilities include creating clear and attainable project objectives, building the project requirements, and managing the triple constraint for projects, which is cost, time, and scope.

Quality Assurance – is responsible for verifying and validating that all project deliverables (PM, requirements, design and execution plan) meet the PM, functional and technical standards established in the Acceptance Plan.

Business Owners have managerial responsibilities for the Tax Reporting and Tax Compliance functions, as such they are the ultimate beneficiaries of this project. This project must meet the needs of the Business Owners to be successful.

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Team Roles (cont.) Competency Leaders have developed expertise in their respective competencies,

as such are responsible for sharing that knowledge with the project team. Competency Leaders assist the Business Owners by ensuring that new processes, controls and tools meet the needs of their competency and will lead to a “Best in Class” Tax Department.

Subject Matter Experts (SMEs) - department managers responsible for targeted business processes, as such can provide first hand understanding of the business needs and issues that this project has to address.

Business Lead – is responsible for leading the business team (Business Owners, Competency Leaders, SMEs, Business Analysts and Scribe) and ensures the resulting business deliverables are produced on schedule and meet the established quality standards.

Business Analysts – are responsible for driving out business requirements and developing business solution designs

Technical Leads are responsible for leading the technical team and ensure the resulting technical deliverables are produced on schedule and meet the established quality standards

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Team Roles (cont.)

Technical Analysts - are responsible for driving out technical requirements and developing technical solution designs

Scribe – is the documentation specialist for the team and is responsible for ensuring that all deliverables produced meet the established quality standards.

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Pre-Requisites

Prior to holding requirement sessions, the team will educate themselves by reviewing the following materials:

- Review FIT 2008 Current Enhancements & Proposed changes- Review TaxWire / TIS / CorpTax diagrams as defined during A&E Project I- Review Tax Reporting quarter-end process as defined during A&E Project I;

pending Internal Audit review and signoff- Review critical spreadsheets - some improvements made during Q3

Remediation- Review SOX controls relying on critical spreadsheets- Pending Tax Reporting Improvement Opportunities, such as;

• Automate journal entries for foreign deferred tax reversals • Automate journal entries for revaluation of monthly FIT entries at the month-

end exchange rate