Asset-intensive companies with a significant investment in property, plant, and equipment (PPE) reach a tipping point at which it becomes exceedingly difficult to calculate tax depreciation and by extension deferred tax balances in an ERP system with precision. The reason is that depreciation is calculated differently for tax purposes than it is for Generally Accepted Accounting Principles (GAAP) purposes. As fixed assets reach a certain percentage of an organization’s balance sheet, that difference in how tax depreciation is reflected generally becomes so large that it draws the attention of auditors. And as CFOs of asset-intensive companies know all too well, auditors are generally not placated when given reams of spreadsheets to pore over for answers to their questions.
Calculating Tax Depreciation
Tax reporting is another challenge for an asset-intensive organization, as reports for tax purposes are typically organized around legal entities as opposed to business operating units. Calculating tax depreciation directly in SAP ERP Financials, then, adds complexity from a reporting standpoint due to different roll-up requirements than those of the controller’s office.
With a robust fixed-asset tax depreciation solution that integrates with SAP ERP Financials, organizations can have the efficiency and functionality of general ledger accounting in SAP systems combined with tax depreciation calculations that leverage identical data, all without having to devote considerable resources. When considering such a solution, asset-intensive organizations need an application that delivers seamless ERP integration to mitigate audit risk and regulation non-compliance, and to ensure an optimized tax position.
Stay Current, Stay Compliant
BNA Fixed Assets G/L Integrator recently achieved certified integration with SAP ERP.1 Through the integration, BNA Fixed Assets delivers a closed-loop process for fixed asset management. The solution creates a separate fixed assets tax sub-ledger that mirrors SAP ERP Financials. SAP ERP transaction data is exported into this sub-ledger for the purpose of calculating tax depreciation for each specific accounting period. For asset-intensive companies, this could entail millions of line items. At the end of an accounting period, automated reports will reconcile gross and net PPE depreciation figures with reporting from SAP ERP Financials. By providing up-to-date and automatic tax reform and regulation updates, this solution also ensures compliance and maximizes fixed-asset management efficiencies.
This end-to-end process allows users to stay on top of new reporting requirements, reconcile data and policies, and apply these frequent changes to multiple books, companies, and assets. Essentially, BNA Fixed Assets removes the numerous uncertainties and discrepancies that can occur when relying on manual processes or using a tax solution that is not integrated with an ERP system. At any time during the year, users have complete visibility into how tax depreciation calculations tie into transactional records.
BNA Fixed Assets removes the numerous uncertainties and discrepancies that can occur when relying on manual processes or using a tax solution that is not integrated with an ERP system.
A History of Handling Tax Challenges
BNA Fixed Assets leverages Bloomberg BNA’s 30-year history of delivering fixed asset software addressed to handle tax challenges of large enterprises, offering scalability to handle up to millions of assets in a hosted model that takes the significant burden of tax processing off the shoulders of the controller’s office. For more information, visit www.bnasoftware.com.
1 See www.bloomberg.com/bb/newsarchive/aDOSzmSBQtps.html. [back]