cost and tax accruals management
Do you find it difficult to track and account for tax and social
security costs for assignees on a global scale? Incremental tax
and social security costs usually form the most significant cost
associated with assignees and very often such costs are not actually
incurred in the accounting year in which their associated payments
(such as housing) arise.
It is not uncommon for significant unaccounted for tax and social
security liabilities to arise several years after the event, which
can lead to serious consequences for the business line affected.
Our diagnostic review of your internal controls in this area would
- How do you build into a tracking process that different countries
have different rules for reporting, accounting for and the timing
of payments of tax?
- Do you understand your tax and social security costs, how those
liabilities are accruing and the consequences of an inadequate
- Are you aware of the timeline of when estimated tax is paid
and when the final liabilities crystallise?
- How confident are you that you have in place suitable accurate
and quickly accessible data in respect of your assignees costs?
- What processes do you have in place for providing accurate,
timely and comprehensive information to third party vendors who
may be running your payroll or completing assignees’ tax
Under published SEC frequently asked questions about the Sarbanes-Oxley
Act, SEC restricted entities must be responsible for generating
good faith and meaningful tax provisions, footnotes and necessary
Your auditors cannot provide you with management systems to help
with this as it would impair their independence. This applies beyond
corporate tax and applies to all areas where tax provisions are
required, such as those for international assignments.
Although at the moment these rules apply to SEC restricted entities,
you should also note the following:
- The banned service rules apply retrospectively to the 3 years
prior to the registration of an SEC registrant
- The EU have recently issued a directive which looks set to
bring in similar rules to the Sarbanes-Oxley Act for European
We suggest you should be prepared for these changes by conducting
an improvement review of your current tracking system.
How can Stephen Asher Consulting help?
As we are not an auditing firm, we can apply our extensive knowledge
and experience to help you set up and establish a process for managing
internal controls without being affected by any independence rules.
We have developed tools that will help companies set up and manage
a tax accrual to track tax and social security costs and release
excess accruals to the profit and loss account when appropriate.
At the heart of our solution is a review of current data management
and cost tracking processes for international assignment costs,
which could lead to other improvements to internal processes.
If you would like to explore this matter further, please call or
email Alison Asher.