Survey Results Show Successful Automation as a Top Corporate Repair Regulation Challenge
The first year of repair regulations was about compliance. The second year and beyond are now about efficiencies and best practices through automation.
Successful automation makes the list of top repair regulation challenges faced by corporations in 2014 – reducing complexity, and making administrative, technical, and data obstacles a thing of the past. As discussed in a Financial Executive article published earlier this year, the first year of the repair regulation changes was all about compliance, by whatever means possible. However, year two and beyond are about creating efficiencies and best practices through automation. To that end, Bloomberg Tax conducted a market survey of 83 corporate tax professionals with the goal of gleaning real world lessons that could be shared with clients. Here are a few of the findings:
- 61% of respondents viewed the repair regulation changes as favorable, with the majority of those respondents having filed Form 3115 (an application for change in accounting method)
- Over half of corporations revised their capitalization policy, while more than 40% did not
- Over one-third of respondents believed the changes to their fixed assets system and their ERP/accounting system were significant
- Over 40% of respondents had to make significant changes in Excel or to their custom system, with over half of the respondents continuing to do a portion of their fixed assets function in Excel
- Automation challenges were varied, but they did require overcoming four key obstacles:
- Complexity — understanding the regulations and how to apply them
- Administrative — completion of Form 3115, additional recordkeeping due to the new regulations, and making changes to existing company policies and procedures
- Technical — partial dispositions, rotable spare parts, and navigating multiple elections
- Data — decentralized data, tracking differences in future cost basis, and tracking previous years using either IRC Section 481(a) (the adjustment method that represents the cumulative difference between present and proposed methods), or the “Cut-off” method where only items arising on or after the beginning of the year of change are accounted for
The survey confirmed that compliance with the final repair regulations has brought to light the massive misalignment between current systems and the new repair regulation requirements. With over half of the respondents still using manual processes, such as Excel, to manage their fixed assets, the same challenges corporations faced in 2014 will continue to resurface year after year unless something is done differently. For many, these changes will take the form of automation. A shift is occurring. In the past, we witnessed companies simply looking to achieve compliance by whatever means possible, now they are proactively developing fixed assets best practices. A critical cornerstone of this strategy is automation of the repair regulation and maintenance deduction processes.
Fixed Assets™ from Bloomberg Tax enables companies of any size to automate and manage the complete fixed assets lifecycle. With built-in compliance and the latest tax code, it simplifies the fixed assets process from construction and acquisition through disposal. Informed companies know that automation, when done properly, can overcome all of the top repair regulation challenges including reducing complexity, and making administrative, technical, and data obstacles a thing of the past.