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Manufacturing: Complex Financial Reporting: New Market Tax Credits

A public company (“the Company”) is a leading manufacturer of heating and cooling products. The Company received a $23 million New Markets Tax Credit (NMTC) allocation for its new facility expansion at its Longview, Texas manufacturing plant. The NMTC program was created under the Community Renewal and Tax Relief Act of 2000 to stimulate economic growth and increase the flow of capital to businesses and low-income communities by providing a modest tax incentive to private investors.

The NMTC utilizes a complex leveraged structure, which is challenging from a financial reporting perspective. The NMTC’s leveraged structure is within the scope of multiple complex areas of U.S. GAAP, including distinguishing debt from equity, consolidation and business combination guidance. The Company engaged Dacarba’s Complex Financial Reporting team to successfully deliver on the following activities:

  • Analyze aspects of the NMTC structure and determine appropriate accounting and financial reporting presentation
  • Consider the implication of the interaction of multiple complex U.S. GAAP standards
  • Determine the appropriate accounting for various fees associated with the transaction
  • Documentation of conclusions in a technical memo to support management’s conclusions and serve as audit evidence

Dacarba added value by providing subject matter experience in the most complex areas of U.S. GAAP, including: ASC Topic 470 – Debt, ASC Topic 805 – Business Combinations, ASC Topic 810 – Consolidation and ASC Topic 835 – Interest. Because of Dacarba’s efforts, the Company successfully completed its analysis and reporting for the NMTC structure ahead of schedule and streamlined its external auditor’s review process, which ultimately saved the Company time and money.

Dacarba employs a team approach to solving complex issues that management teams face in today’s business environment. Whether our clients need to improve financial reporting processes, seek assistance to deploy or update technology systems or undertake a business transformation, we have the expertise to offer substantial, clear-sighted recommendations and strategic support. Our expertise rivals the multi-national firms, while our focus on the market and personalized client service make us a unique player in this advisory arena, offering professional financial and technology consulting. For additional information, CLICK HERE.

Amy Stutzman

Managing DirectorOpportune LLP