Valuations for Financial Reporting, Tax and Transfer Pricing in the TCJA Era

Simon Webber, Managing Director in the Transfer Pricing practice at Duff & Phelps, authored an article in Bloomberg Tax titled, “Valuations for Financial Reporting, Tax and Transfer Pricing in the TCJA Era”. There are many factors contributing to the current climate around merger and acquisition (M&A) activity, and tax reform in the shape of the Tax Cuts and Jobs Act of 2017 (TCJA), is one. The new law has reshaped the way U.S. and many foreign businesses look to optimize their international operations and tax profiles. TCJA along with broader global tax reform has given rise to new tax considerations, challenges and potential tax opportunities. Against this backdrop of continued corporate growth, acquisition activity and tax change, financial reporting, tax and transfer pricing valuation have become even more prominent. TCJA has changed many valuation inputs and materially affects many valuations of assets and businesses for each purpose.

Many multinational companies are considering tax reform-related global planning and restructuring. This planning, which may be undertaken in association with M&A activity, includes reorganizing legal entity structures and moving the economic ownership of developed and acquired intangible assets within the group. The associated need for valuations under financial reporting, tax, and transfer pricing also raises questions over whether valuations for one purpose (say financial reporting) can or should be used for transactions for similar assets or businesses for other purposes (say tax or transfer pricing).

While far from an exhaustive analysis of these issues, this article provides some insights into the impact of TCJA on valuations and some of the main considerations and differences between valuations for tax, transfer pricing and financial reporting.

Read the full article here.