Best Practices for Integrating Fixed Assets Data Post-Merger or Acquisition
Regardless of how the deal is structured, pulling fixed assets data from proprietary spreadsheets or customized databases of the acquired company can prove extremely labor intensive.
According to Deloitte, despite a slow start at the beginning of 2016, there has been an unprecedented number of domestic mergers and acquisitions (M&A) since October 2016. For tax and accounting teams, a merger or acquisition creates an influx of time-consuming manual work.
Regardless of how the deal is structured, the buying company will need to merge their fixed assets data with that of the acquired company. It is highly unlikely that both are using the same fixed assets accounting processes and technology. In fact, the software group of Bloomberg BNA recently conducted a survey of 100 finance executives at US-based corporations and found that more than one half of the respondents used their own proprietary spreadsheets or customized databases to manage their fixed assets. As you may surmise, it would prove extremely labor intensive for the purchasing company to have to manually pull and input data from multiple spreadsheets, databases, and paper copies.
The survey also showed that just over one-third of the companies surveyed used a fixed assets software solution with limited capability, forcing them to supplement with manual spreadsheets to track assets associated with segregation studies, repair expenses, and impairment adjustments. Here are some recommended best practices that a purchasing company can follow to ease the post merger/acquisition fixed assets accounting burden:
- Communicate with the acquired fixed assets team to understand GAAP requirements for tax purposes. If some or all of the data comes from appraisers, it is still important for both sides to fully brief each other so as to better understand how historical data was compiled.
- Make sure your company has a depreciation policy document in place that clearly communicates how your company depreciates assets. In addition, request a depreciation policy document from the acquired company to see how they have historically depreciated assets. If they do not have one, request that they create one. Not only is this document invaluable for ensuring consistency, it is also helpful should your company undergo an audit.
- Provide the acquired company or appraiser with a fixed assets template to use when collecting or submitting their depreciable fixed assets data. This standard template will include all data fields and parameters your company requires based on your existing processes and thereby reduce any manual effort.
- Ask for the previous year’s tax return, including IRS form 4562, form 4797, and associated worksheets. These documents will be very instrumental when validating the start and year-end numbers.
- So as not to miss an important tax deadline, it is essential to proactively gather fixed assets data for accurate tax reporting, compliance, and other record retention requirements in a timely fashion.
- Track all physical assets including location and condition at least once every two to three years, especially for high-priced items. Inventory services performed should include tagging each asset using barcodes, and matching the actual inventory to existing financial data.
Once data is collected, merged, and cleaned, it is recommended that the acquiring company implement a robust, end-to-end fixed assets management solution such as Bloomberg Tax Fixed Assets, that provides:
- Increased cash flow after taxes
- Reduced time and effort to manage fixed assets
- Faster close
- Reduced audit risk
- A holistic view of all fixed assets
- Greater peace of mind through improved accuracy