2018 Audit Committee Outlook for Life Sciences

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Male and female scientistThe life sciences sector is no stranger to change. In fact, many leaders in this industry have succeeded because of their ability to thrive in a constantly changing environment. Executives will continue to face new challenges in the year ahead. The delivery process for pharmaceuticals may be on the verge of significant change with Amazon considering an entry into the market. Economic and regulatory pressures will continue to drive mergers and acquisitions that establish new collaborative business models, such as insurer Aetna’s merger with retail pharmacy chain CVS.

At the same time, the financial side of the business faces a wealth of changes driven by lawmakers and standard setters. New tax laws, accounting rules, and risk strategies are challenging directors who serve on audit committees for life sciences businesses to be more engaged than ever before. Our goal with this publication is to provide you a high-level review of current accounting and tax concerns facing this sector in order to bring to your attention areas that may require increased oversight.

Tax reform will drive much of the learning that directors need to do for 2018. Several provisions in the tax bill could affect life science companies in a variety of ways, such as:

  • The reduction of the corporate tax rate;
  • The elimination of the corporate alternative minimum tax;
  • An influx of repatriated cash that could be used to repay company debt, fuel new business development activities, or reinvest in U.S.-based projects;
  • Re-establishment of the medical device excise tax (MDET). As a result, the MDET and related compliance obligations are currently in effect for sales made after January 1, 2018;
  • R&D credit changes;
  • Base Erosion Anti-Abuse Tax (BEAT); and
  • Full expensing for asset purchases.

Download our 2018 Audit Committee Outlook for Life Sciences to understand how recent and near-future developments impact corporate financial reporting and disclosure.