Time for Harmonization… Integrating Financial Close and

4/4/2013

1

Time for Harmonization…Integrating Financial Close

and Tax Provisioning Processes

Administrative

CPE regulations require that online participants take part in online questions

Must respond to a minimum of four questions per 50 minutes

Polling questions will appear on your media player

Results will be reviewed in the aggregate; no responses will be tracked back to any individual or organization

Do not view the presentation on slide show mode – polling questions will not appear

To ask a question, use the “Ask A Question” icon on your media player

Help Desk: 1-877-398-1471 or outside the United States at1 954 969 3342

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

1

1-954-969-3342

4/4/2013

2

Agenda

Overview of KPMG EPM & Analytics

Tax Survey – Key Findings

Technology Opportunities in Tax

Aligning Financial and Tax Close Processes

Xena Ugrinsky KPMG

Principal - BI/EPM Advisory


2

New Solution – Oracle Tax Provisioning Module

Q&A

Tax Survey

Key Findings

Chris Novoa KPMG Director – Tax

4/4/2013

3

Data Acquisition and Processing Tasks Dominate Tax Activities

In 2012, KPMG surveyed 1,150 tax executives as part of its biennial survey of global tax functions. US tax leaders expect their tax departments to devote time over the next 12 months as indicated below:

Tasks Percentages** Data and Processing Focused?Tasks Percentages Data and Processing Focused?

Tax Compliance 17% Yes

Accounting for Income Taxes/Provision/Financial Reporting 19% Yes

Integration with Business Groups* 7% No

Cash Tax Savings* 10% No

Tax Deferral and Optimizing Tax Rate* 11% No

Audit Defense and Tax Controversy 11% Yes

Managing Tax Risk 9% Partially

Tax process improvement and technology utilization 9% Yes


4

Tax process improvement and technology utilization 9% Yes

Influencing tax policy 6% No

*High value tax activities ** Rounding 1%

Key Takeaway: Over 50% of tax activities are focused on data acquisition and processing, which constrains the availability of resources for high value activities

Finance and Tax Functions Are Improving Processes and Technology

The results of the 2012 survey underscore KPMG’s experience with our finance and tax function clients:

Activities in the Past 12 Months (prior to survey)

US-based Finance Functions

US-based Tax Functions

Key Takeaways:

Finance leadership is investing in finance function process and technology

survey) Functions Functions

Percentage that have undertaken global or regional process improvements

70% 57%

Percentage that have undertaken technology improvements or strategic reviews:

60% 46%


5

Finance leadership is investing in finance function process and technology improvements.

Tax projects appear to lag finance projects: Tax should be actively participating and making the business case for similar improvements.

4/4/2013

4

2000 to 2011 Tax department surveysShifting tax department priorities

1 – Effective tax rate

2 C h fl

1 – Accurate/timely financial reporting

1 – Effective tax rate is at expected rate (no

2000 20112009

2 – Cash flow

3 – Compliance

4 – Tax deferral

5 – Audit defense

reporting

2 – Compliance with FIN 48

3 – SOX compliance

4 – Tax compliance deadlines are met on schedule

5 – Effective tax rate is at expected rate (no surprises)

expected rate (no surprises)

2 – Tax risks are managed appropriately

3 – Tax compliance deadlines are met on schedule

4 – Tax function generates cash savings or manages cash taxes effectively

5 – Tax function supports


6

ppcorporate strategy

Results were measured on a 1-5 scale where 1=not important at all and 5=very importantSource: 2000 & 2009 KPMG’s Tax Department Surveys; 2011 KPMG’s Tax Department Benchmarking Study

Current environmentTypical approach

Information Sources

Quarterly provision

Highly manual process using: Email Excel Manual data extracts

Estimated payments

Fairly manual process using: Email Excel Manual data extracts Internet/Forms

annual tax provision

Highly manual process with heavy data management using: Email, Excel, Word Manual data extracts/taxSou ces

G/L

A/P, A/R

Div. Apps.

Shared Services

Internet/Forms Manual data extracts/tax packages

Some firm applications

Tax returns & extensions

Fairly manual process with heavy data management using: Email, Excel 3rd Party Tax Software Some data mapping Tax packages

T l iT tA d t /RAR

Data Collected Manually & Separately


7

Investments

Other Legacy Apps.

Tax planning

Judgmental and heavy analyzed process referencing historical and forecasted data using: Email, Word, Excel Research tools Limited use of Tax Software

Tax controversy

Highly manual process pulling and analyzing data and previous work product using: Email, Excel Limited use of Tax Software

Amendments/RARs

Partially manual process incorporating changes using: Email, Excel, Word Tax Software

4/4/2013

5

Future state visionIntegrated tax process, data and technology

Source Systems

G/L Multi-Purpose

A/P

A/R

Investments

Tax

Po

rtalDocument

Management & Workflow

pTax Data

Repository


8

Legacy

Tax Applications

Provision Compliance Indirect Planning

Technology opportunities with key tax processes Overview: Identifying key tax processes

11Data Quality & Collection

The process of collecting, reviewing and validating book accounting data to adequately support the tax function requirements

22Data Management

The process of transforming book data to be used for tax calculations and reporting, as well as, managing data for multi-period and multi-processes

33Tax Calculation

The process of computing book-to-tax differences, generation/utilization of tax attributes and performing scenario/what if analysis

Reporting


9

44p g

The process related to generating the various standard reports, tax returns, and ad hoc reports to satisfy internal and external customers

55Retention

The process of maintaining and accessing historic work product and underlying data supporting the tax calculations and reporting

4/4/2013

6

Technology opportunities with key tax processesData quality & collection

1

ERP tax sensitization

Key options Legal entity reporting

Tax sensitive accounts

Desired

Ou

tcom

es

Tax JV based system supported by Excel or other

Excel based tax packages

Tax software packages

System generated book information

Integrated unstructured data that can be leveraged across all impacted processes


10

Questionnaire based software

Technology opportunities with key tax processesData quality & collection – Tax intelligence pyramid

Tax IntelligenceActively monitoring the group tax position and planning

Tax Intelligence – Ability to provide timely insight & Decision support

How well does the tax department supportp gValue adding – to provide timely insight and decision support

ERP Alignment

Tax Application IntegrationMeeting jurisdiction specific compliance regulations and requirementsOperating efficiently and effectively – to process data into tax relevant information

Tax intelligence

Tax Fixed Assets

Tax Technology

Transaction Tax

How well does the tax department support the business? Does tax data easily translate into information that adds value?

Tax Intelligence – Ability to efficiently process data into tax relevant information

Is there too much manual work to produce tax provision, compliance, depreciation?

Base Data Quality – Ability to effectively use upstreams system


11

gGetting the basics rightReducing risk – to appropriately leverage systems data for tax calculations

Supply Chain

Sensitization

Operational Transfer Pricing

Tax Sensitization

data for tax calculations

Is there too much time spent making systems data usable for tax analysis or applications?

4/4/2013

7

Technology opportunities with key tax processesData management

Tax department centric solution

Key options Adjusted trial balances that can be aggregated, as well as disaggregated

2

Desired

Ou

tcom

es

Enterprise data warehouse

Hyperion

Other

Data that is manageable across multi-periods without repurposing

Data that is manageable across multiple tax processes

Effective data mapping


12

Effective data mapping

Built-in data validation

Technology opportunities with key tax processesTax calculations

Excel

Key options Tax calculation models that can be easily updated

Calculations separated from

3

Desired

Ou

tcom

es

Tax software packages

ERP

Hyperion

Data warehouse and custom built-on li ti

Calculations separated from data/data management but that can be easily applied to changes in book amounts

Automation as appropriate

Rules management, controls, audit trail and calculation


13

applications audit trail and calculation validation

4/4/2013

8

Technology opportunities with key tax processesTax reporting

Excel

Key options System generated standard reporting

4

Desired

Ou

tcom

es

Tax provision packages

Tax return packages

User ability to leverage existing data and computed amounts to generatenon-standard reports

Provide work product supporting schedules and


14

Data marts and warehouses supporting schedules and analytical reports

Technology opportunities with key tax processesRetention

Shared drives

Key options Easy access to historic work product

5

Desired

Ou

tcom

es

Tax only “knowledge sharing” platform

Enterprise document management systems

System that supports execution of company document retention policies

Provide access point to facilitate links among tax sub-processes


15

processes

4/4/2013

9

Tax department staging database case study

Provision N

Tax Data Management & Calcs Reporting Data & Supplier

Third Party Provision Tool

Tax ProvisionReports

T

Other Tax

Mgmt

Tax Return

Ad Hoc

Ad Hoc Reports

Tax DepartmentData Mart

(SQL)

Non-U

S P

ackages

Tax Third Party


16

TaxReturns

Data Requests

ERP

TaxComputation

Schedules

Third Party Compliance Tool

Considerations/Limitations

Tax Sensitization

Consolidated Financials cannot be fully tax sensitized due to conflicts with financial reporting requirements and/or amount of detail/overhead required

Source Account Data Mining

Tax users require the ability to “data mine” account level data below consolidated accounts and run ad-hoc queries that traverse the various business unit/entity levels of the enterprise

Drill back to Source Transaction

Tax users require the ability to drill back from Provision M-3/Tax Return line items down to the underlying transactions


17

down to the underlying transactions

Tax System Administration

Tax users must become pseudo-DBAs in order to maintain and administer tax systems

Source:** CFO magazine, “The CFO is the Closest Confidant to the CEO”, an interview with Mark Goodburn, Vice Chair Advisory, KPMG LLP.

4/4/2013

10

Harmonization of the Financialthe Financial Close and Tax Provisioning by Oracle

Jessica Downes CPA, MST

Oracle

Tax & Finance Share the same DNA

Financial Close

Day 0

Financial Statements

Data - Meta Data - Resources - ProcessClose G/L

Trial Balance

SubmitSchedules

Review & Approve

ConsolidateConsolidatingConsolidatingAdjustments

Disclosure & Filing


19

Trial BalanceBy Legal

Entity

SubmitSchedules

Review & Approve

Consolidate

Tax Journal Entry

& Footnote

Tax Close

4/4/2013

11

Hyperion’s Financial Close Suite

Purpose-Built / Out-of-Box: a Tax Provision solution that is built on the Hyperion Financial Close Suite

Data Collection, Tax Provision Calculation, C lid ti & T R ti

Integrates with Tax Compliance: Enhances & integrates with tax compliance software

Rapid Implementation & Ease of use: the technology & expertise is already in the

Consolidation & Tax Reporting

Global: Federal, State/Provincial & International

Addressing IFRS (IAS12) & US GAAP (ASC740)

Finance organization


20

Tax Footnote


21

4/4/2013

12

Expanded Current Provision


22

Current Provision Web Form


23

4/4/2013

13

Consolidating Reports with Tax Specific Rollups


24

Deferred tax by classification


25

4/4/2013

14

Details of Deferred Expense


26

Consolidated ETR


27

4/4/2013

15

Journal Entry


28

Tax Automation of Perms & Temps


29

4/4/2013

16

Summary

Advances in technology are making the process of tax provisioning easier. Given tax consumes up to 30% of profit; it makes sense to invest to optimize as much as possible.

Harmonization of the financial close and tax provisioning process is possible given the introduction of new technologies and advances in handling data.

All of Finance can gain efficiencies and valuable insights by adopting new processes, strategies and technologies


30

The experts and KPMG and our partners at Oracle are here to assist you

Question and Answer Session

4/4/2013

17

Thank You! For more information – Please contact

Roxann Kerner

KPMG

Solution Relationship Director

[email protected]

M: 847.867.5368

Or your KPMG or Oracle contacts

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”) a Swiss entity All rights reservedInternational ), a Swiss entity. All rights reserved. Printed in the U.S.A.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

Documents

Time for Harmonization… Integrating Financial Close and