In our Toolkit podcast series, we are taking a deep dive into one accounting topic each month that goes beyond the basics and into areas that require judgment. This month, we are covering income taxes–an area that generates numerous technical questions.

Companies prepare separate financial statements of subsidiaries for various reasons, such as spin offs, regulatory requirements, or compliance with debt covenants. In this episode, Heather Horn was joined by Jenn Spang and Matt McCann, partners in PwC’s National Office, to discuss the accounting guidance for income tax provisions in separate company financial statements.

In this episode, you will hear:

• 1:15 - An overview of guidance for allocating a tax provision to subsidiaries under ASC 740
• 6:26 - An introduction to the separate return method
• 12:15 - Common modifications to the separate return method, including benefits-for-losses
• 17:50 - How tax sharing agreements impact the provision and related balance sheet accounts
• 25:22 - How to account for uncertain tax positions in separate company financial statements
• 27:59 - Specific considerations for carve-out financial statements
• 35:33 - Final advice on how to effectively navigate the complexities of separate financial statements

Want to learn more? Listen to our previous podcasts, Working with uncertain tax positions, and read about separate company financial statements in our Income taxes guide.

Jenn Spang is a partner in PwC’s National Office and serves as the income tax accounting leader, specializing in tax accounting under US GAAP and IFRS. She has over 25 years of experience helping companies in a variety of industries navigate complex tax accounting matters.

Matt McCann, is a partner in PwC's National Office who provides consultation in the areas of revenue recognition and income taxes. He has over 25 years of experience and previously served as the leader of the Consumer & Industrial Products Sector Assurance Practice in North Texas.

Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series. With over 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to [email protected].

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