With the passage of the largest overhaul of the tax code in more than three decades, it was axiomatic that the technology used by tax practitioners would be directly impacted. What has that impact been, and what has it meant for in-house tax departments? To answer those questions, we scheduled a roundtable on this topic. We convened a forum in late July comprising Jennifer Deutsch, partner at Deloitte Tax LLP; Jeremy Lipshy, senior vice president for Bausch Health Companies Inc.; Kirsten Nordlof, global head of tax, treasurer, and vice president of finance at Autodesk; and Bob Norton, specialist leader at Deloitte Tax LLP. Deutsch moderated the discussion, which was facilitated by Michael Levin-Epstein, senior editor of Tax Executive.
Jennifer Deutsch: Right before the call I sent over our premise for the roundtable today. It's really based on how your companies are approaching what we would call the "operationalization" of tax reform. I think many tax professionals have worked through some initial assessments, and so let's start with discussing the impact of reform and then try to think about what operational challenges you're facing. Have you made some decisions, short-term or long-term, on how to address them? What's driving it?
Kirsten Nordlof: At Autodesk, we were in a unique situation in the sense that we have recently, from the ground up, rebuilt the tax department. So, we didn't have time to really ramp for tax reform, as our tax planning and provision teams were new, so we just hit the ground running. We built out work papers internally. We had those vetted with various professional accounting firms, and we relied heavily, heavily on spreadsheets. We didn't have time to build in the automation. So, it's a spreadsheet-driven model, which has its limitations in scenario planning, because there's so many different factors at play in tax reform. It is overlaid on top of an already complex provision process. We built out spreadsheet models that we vetted and are strong. It will be nice to have time to automate more of it as we move forward. The second unique factor is, as you know, Jen, we were in the process of designing a new ERP system, so we're hoping to leverage our new ERP system and have a lot of it built-in and automated as we settle into what our operating model's going to be post-tax reform. I think as an industry it's very rare to have the skill set to know how to design a system to be flexible and adaptable, especially when you're using a new system. We're going to a cloud ERP system, and we just didn't have the skill set in-house to really make sure that we got everything we need. Hopefully, designing a new ERP system is only once or twice in our career, right? We don't want to be doing it every day, so we want to do it right.
Jeremy Lipshy: Please, please--from your lips to God's ears. It's funny, because we're doing that same thing right now. From our end, from an operational perspective, it was a little bit different, just because we were already a Canadian-parented company, and we don't make an APB 23 assertion. So, we have already been doing E&P calculations, withholding tax calculation estimates and residual U.S. tax liability on our CFCs that we still had underneath the U.S. group. So, a lot of it for us was just modification of that database. We also tried to [automatize] ours--do it through an automation project--so we built this model, so that way we can actually flush the data through on a faster basis and do scenario-analysis planning rather than just in spreadsheets. We linked it with the company's ten-year model and all of our other FP&A groups so that way we can actually spit something out, if you will, on a very quick basis.
Nordlof: We didn't have that. I would love to get there, to that situation, but we don't have that right now. In fact, from a business perspective, we're going through an interesting time as well. We have a couple big things going on at the same time. We used to be a perpetual license-based company, and we're in the process of moving to a subscription-based company, so our revenue models are totally different this year than they were two to three years ago. Also, in the U.S. we have--and I assume you have it, too--the ASC 606-605 deferred revenue challenge--
Nordlof: So it's an interesting year to also digest tax reform.
Lipshy: It was the confluence of all events, right? You had different accounting standards, revenue recognition, you had a large tax reform, a short period to do it, all at the same time that both of our companies are going through infrastructure changes. So, we're looking at doing an ERP implementation at the same time and trying to figure out how it dovetails and how you build the flexibility out. We all would like to explore alternatives to spreadsheets to a certain degree, but when it comes to modeling, when it comes to alternative planning and being nimble as they change rules and give additional guidance, you still have a need for spreadsheet-based models in the interim.
Nordlof: That's right. For us, from a technology standpoint, we just couldn't get the IT support, because getting the deferred revenue implementation was so critical from a technology standpoint. Autodesk went live with the new revenue standard in the first quarter we went live with tax reform. There was simply not enough time to build automation.
Deciding on a Strategy
Deutsch: Kirsten, you mentioned you had a lot of internal resources that were tied up. In getting data, how have you changed, or, if you can, comment around making that shift between initial paths and either how you're planning for additional refinement to the data, or how have you shifted between those two periods? Did you...