Founded in 1912, Illinois Tool Works (ITW) is one of the world’s leading diversified manufacturers. The company’s products and solutions are at work all over the world, in deep-sea oil rigs, aerospace technology, bridges and wind turbines, health care, the spaces in which we live and work, the cars we drive, and the mobile devices we rely on.
With operations in 57 countries that employ more than 50,000 people, ITW has more than 100 independent business units, each managing thousands of fixed assets. However, the software the company was using to manage its fixed assets simply couldn’t handle the volume and complexity inherent in ITW’s vast business model.
While each ITW business unit is responsible for entering and managing both GAAP and tax data for fixed assets, it’s the corporate tax department at ITW that is responsible for tax reporting.
“Because fixed assets are a highly visible area within the tax department and the company in general, it was mandated that all business units use the same fixed assets management software,” said a federal tax manager at ITW.
One of the company’s key issues was that each business unit had its own instance of the legacy software, meaning that data wasn’t centralized across the company. Adding further complexity, not all business units were running the same version of the software. Also, the software didn’t support transferring assets from one business unit to another – a process that happens frequently at ITW.
As a result, at year-end, the corporate tax team would receive hundreds of copies of the fixed assets databases from across the company to review, which took months to complete.
“By the time the reviews were completed, so much time had passed that the units couldn’t simply upload those changes back to their databases,” the tax manager said. “Instead, they had to make changes manually within their systems.”
The fixed assets software system that ITW was using simply couldn’t serve the needs of the business, so they started looking into other options that could streamline their processes.
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Managing fixed assets today represents significant challenges for organizations but getting it right can lead to valuable tax savings opportunities, new efficiencies, and improved bottom lines.
The pain our company used to go through managing fixed assets was ridiculous, but with Bloomberg Tax & Accounting Fixed Assets everyone is extremely happy. ... In years past, our return-to-provision adjustments were several million dollars. With Bloomberg Tax & Accounting Fixed Assets, the adjustments were less than one million.
ITW Federal Tax Manager
ITW decided to replace its legacy fixed assets system with a new cloud-based solution that would meet the requirements for each business unit, as well as the corporate tax department. The new solution needed to help ITW achieve a number of business goals, including:
Every business unit would be using the same system, which would always be the most up-to-date version
All the fixed assets data would be in one, centralized location, easily accessible by the corporate tax department
ITW could standardize the data and processes across all of its business units
After researching available software products on the market, ITW management chose Bloomberg Tax Fixed Assets, noting that it was “the easiest system to use while offering all the functionality we were looking for.”
Bloomberg Tax Professional Services worked with ITW to convert the fixed assets data from its previous system to the new Bloomberg Tax Fixed Assets system and helped ITW train 300 users on the new software.
The first year after deploying Bloomberg Tax Fixed Assets, ITW completed the year-end review in record time, saving 400 hours of effort and finishing its review three weeks sooner than the previous year.
Because the data is now centralized and available in real time, the corporate tax team can now periodically review tax books throughout the year to further streamline and accelerate the year-end process. An unexpected benefit was the reduction in return-to-provision adjustments.
In years past, those adjustments added up to several million dollars. After implementing Bloomberg Tax Fixed Assets, the adjustments were less than one million, according to an ITW federal tax manager.
Asset additions were a challenge to manage because many of the accounting staff in the business units weren’t as knowledgeable about tax rules as they were about GAAP rules, and the previous software also didn’t support transferring assets between business units.
“When we had transfers, the numbers never seemed to match up,” the ITW tax manager noted. “Bloomberg Tax Fixed Assets lets our business units add and transfer assets easily and accurately. It’s all automated so the GAAP-oriented folks in the business units no longer even have to look at the tax books.”
Now that Bloomberg Tax has streamlined the year-end fixed assets review process, the corporate tax team has more time for strategic work, such as conducting CapEx studies that look at new assets placed into service and verify that the tax life is correct.
“In the past, it was such a long and drawn-out process to get the information we needed for CapEx studies that we weren’t able to do them nearly as often as we wanted,” the ITW federal tax manager said. “Now, with Bloomberg Tax Fixed Assets, the process is streamlined and we can conduct studies with real-time data, which lets us ask better questions.”
All of which is good for the company’s tax department as well as the company’s bottom line.