eBay identifies errors in tax reporting
Online sales platform eBay has notified US regulators that is has identified a material weakness in its internal control over financial reporting which means it did not correctly account for the tax on some transactions in December, and is now implementing a remediation plan
7 Feb 2017
In a 10-K filing to the Securities and Exchange Commission (SEC), eBay stated that ‘in reviewing the accounting for certain transactions we completed in December 2016, as part of the realignment of our legal structure, our management identified a deficiency in the effectiveness of a control intended to properly document and review relevant facts and apply the appropriate tax accounting under standards generally accepted in the US, which impacted the deferred tax asset and income tax benefit accounts and related disclosures.’
EBay went on to report that its management ‘has concluded that the deficiency constitutes a material weakness in our internal control over financial reporting and, as a result, internal control over financial reporting was not effective as of December 31, 2016.’
The control deficiency resulted in an adjustment to eBay’s annual financial statements as of and for the year ended December 31, 2016, but has not resulted in a misstatement of previously issued consolidated financial statements.
EBay said its auditor, PwC has assessed the effectiveness of its internal control over financial reporting. Management has now begun implementing a remediation plan, which will include implementing specific review procedures, including the added involvement of the company’s chief tax officer in the review of tax accounting, in order to enhance the income tax control. It is also to introduce improved documentation standards, technical oversight and training.
EBay stated: ‘We currently plan to have our enhanced review procedures and documentation standards in place and operating in the first quarter of 2017. Our goal is to remediate this material weakness by the end of 2017, subject to there being sufficient opportunities to conclude, through testing, that the enhanced control is operating effectively.’
EBay’s 10-K filing is here.