College of Business: University of Illinois at Urbana-Champaign

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Financial Reporting from Both Sides


3/31/2006

Two people from two different organizations, but who work toward overlapping goals were co-presenters at an early March Lyceum presentation to accountancy students.

Mr. Bruce Piller, partner-in-charge of the audit practice for Chicago and Milwaukee at KPMG LLP, and Mr. Patrick Roxworthy, Vice President for tax at YUM! Brands, discussed the challenges KPMG and Yum! Brands face in assuring the quality of Yum!’s financial reporting and in managing YUM!’s taxes, respectively. An audit, tax, and advisory firm, KPMG’s offerings include attestation, assurance and tax services for corporations around the globe. YUM! Brands is a spin off from Pepsi-Co in 1997 and consists of some of the country's best known restaurant brands: Taco Bell, KFC, and Pizza Hut. In 2005, Yum! Brands generated more than $9 billion in total revenues, including company sales and franchise fees.

Mr. Piller and Mr. Roxworthy each addressed a particular issue of YUM! Brand’s tax structure in their joint presentation.  Mr. Piller spoke about generally accepted accounting principles, saying that the principles are complex and require considerable professional judgment to apply. Tax regulations also are very complex, he said, adding that foreign taxes are generally even more complicated than their US counterparts. Adding to the challenge is the interrelationship between US and foreign taxes: a change in a provision for US taxes can have an impact on foreign taxes and vice versa. Mr. Piller noted that complexities come in many forms, but the major two are those in tax exposure reserves and those in valuation allowances on deferred tax assets.

Mr. Roxworthy told the capacity audience about YUM! Brand's tax cycle, which begins with the audit, at around the time that the company's balance sheet is drawn up.  He also noted that the main goal of YUM! Brand's tax department is to minimise the effective tax rate. Actions toward this goal span from ensuring accurate financial reporting to managing auditor-tax specialist dynamics. The challenge, commented Mr. Piller, lies in the fact that “a lot of solutions are counter-intuitive.”

Talking about tax uncertainties, he said, “Despite tons of documents describing taxes, there are still many grey areas.”  Related, Mr. Roxworthy said, “Yes, [the documentation] can sometimes get to be two and a half feet high!”

Students, many of whom asked questions at the end of the talk, were rewarded with coupons for products offered by one of YUM! Brand’s restaurants.

 

--Shweta Sundararajan

UIUC College of Business