Understanding loss automation

Current year loss carryforward amounts can be automatically calculated for entities. The automated calculation of the loss carryforward adjustment is the result of the following related settings:

• the Use Loss Carryforward Automation system setting
• the Entity Default Setting for Automation of Loss Carryforward Adjustment symbol default setting
• the Automate Loss Carryforward Adjustment legal entity setting
• the Loss Position legal entity grouping setting

This section explains how the combination of these settings, along with other factors, affects loss automation, including the various possible scenarios.

Viewing loss carryforward amounts

The following accounts store the calculated loss carryforward amounts:

• NLossCYGC/NLossCYGC_IAS—Net Operating Loss - CY Generated - Calculated
• RegNLossCYGY/RegNLossCyGC_IAS—Regional Net Operating Loss - CY Generated - Calculated

You can make manual adjustments using the following accounts:

• NLossCYGA/NLossCYGA_IAS—Tax Loss - CY Generated - Adjustment
• RegNLossCYGA/RegNLossCYGA_IAS—Regional Tax Loss - CY Generated - Adjustment

For ASC systems, you can make manual adjustments in the following ASC input apps:

• NA0201 - Current Provision
• RA0201 - Current Provision

You can view the data for loss carryforward amounts in the following ASC reports:

• NA0201 - Current Provision
• RA0201 - Current Provision

For IAS systems, you can make manual adjustments in the following IAS input apps:

• NA1201 - Current Tax Charge
• RA1201 - Current Tax Charge

You can view the data for loss carryforward amounts in the following IAS reports:

• NA1201 - Current Tax Charge
• RA1201 - Current Tax Charge 

For more information on these accounts, input apps, or reports, see the Tax Provision ASC User’s Guide or the Tax Provision IAS User’s Guide.

Understanding loss carryforward system settings

You can automatically calculate current year loss carryforward amounts using the Use Loss Carryforward Automation and Entity Default Setting for Automation of Loss Carryforward Adjustment system settings.

Use Loss Carryforward Automation system setting

The Use Loss Carryforward Automation setting must be set to TRUE to enable the automation of loss carryforward amounts. If this setting is set to FALSE, the loss carryforward adjustment is not calculated. You can set the Use Loss Carryforward Automation system setting using either the System Settings editor or the System_Settings.csv import file.

For more information on the System Settings editor, see “Configuring system settings” in the Longview Tax Administrator’s Guide. For more information on the System Settings import file, see “Preparing an import file for system settings” in the Tax Provision Implementer’s Guide.

Entity Default Setting for Automation of Loss Carryforward Adjustment system setting

This setting is available in the System Settings editor only if the Use Loss Carryforward Automation system setting is set to TRUE.

This setting specifies whether the Automate Loss Carryforward Adjustment setting is selected or cleared by default in the Entities editor. If this setting is set to TRUE, the Automate Loss Carryforward Adjustment setting is selected by default in the Entities editor when a new entity is created. If this setting is set to FALSE, the Automate Loss Carryforward Adjustment setting is cleared by default in the Entities editor when a new entity is created. You can set the Entity Default Setting for Automation of Loss Carryforward Automation symbol default setting using the System Settings editor or the System_Settings.csv import file.

For more information on the System Settings editor, see “Configuring system switches” in the Longview Tax Administrator’s Guide. For more information on the System Settings import file, see “Preparing an import file for system settings” in the Tax Provision Implementer’s Guide.

Understanding loss carryforward legal entity and legal entity grouping settings

You can automatically calculate current year loss carryforward amounts using the Automate Loss Carryforward Adjustment legal entity setting and the Loss Position legal entity grouping setting.

Automate Loss Carryforward Adjustment legal entity setting

This setting is available in the Entities editor only if the Use Loss Carryforward Automation system setting is set to TRUE.

The Automate Loss Carryforward Adjustment setting must be set to TRUE to enable the automation of loss carryforward amounts for a legal entity. The automation process multiplies the Taxable Income before Losses by negative one and puts the resulting value into the Net Operating Loss on the Current Provision. If this setting is set to FALSE, the loss carryforward adjustment is not calculated for the entity.

You can set the Automate Loss Carryforward Adjustment legal entity setting using either the Total Entities page of Entities editor or the Entity_Parameters.csv import file.

For more information on the Entities editor, see “Maintaining entities” in the Longview Tax Administrator’s Guide. For more information on the Entity Parameters import file, see “Preparing import files for entity settings” in the Tax Provision Implementer’s Guide.

Loss Position legal entity grouping setting

The Loss Position setting is available only if the Use Loss Carryforward Automation system setting is set to TRUE.

You can optionally assign an entity to a legal entity grouping. Legal entity groupings are a subcategory of jurisdictions used to group legal and branch entities for certain automation processes. You must define each legal entity grouping as either in a gain or a loss position before loading data for the current period. The Loss Position setting for each legal entity grouping is set using either the Jurisdictions and Legal Entity Groupings page of Entities editor or the LegalEntityGroupings_Parameters.csv import file.

If an entity is assigned to a legal entity grouping, the Loss Position setting of the legal entity grouping determines the entity’s loss position, not the negative or positive income of the entity. If the Loss Position setting is set to TRUE for the legal entity grouping, the system assumes a loss has occurred for all entities within the legal entity grouping that have the Use Loss Carryforward Automation setting set to TRUE. The automation process multiplies the Taxable Income before Losses by negative one and puts the resulting value into the Net Operating Loss on the Current Provision.

The Loss Position setting lets you specify, before users submit data, the loss position of the entire legal entity grouping for all entities within the grouping that have the Use Loss Carryforward Automation setting set to TRUE.

The Loss Position setting determines the loss position of entities within the legal entity grouping instead of the legal entity grouping’s calculated negative or positive taxable income. This ensures that the Net Operating Loss of entities with data already submitted on the Current Provision does not change when data is submitted from other entities within the same legal entity grouping. The Loss Position setting avoids the potential frequent recalculation of the Net Operating Loss that could occur from each data change to the legal entity grouping affecting the positive or negative value for the Taxable Income before Losses.

If the loss position for a legal entity grouping changes after data is already submitted, the loss carryforward adjustment for entities with data already submitted is not automatically recalculated. To properly calculate the loss carryforward adjustment for entities with data already submitted, you must manually run the Loss Carryforward Automation (ASC or IAS) calculation using the Tax Calculations tool.

For more information on the Entities editor, see “Maintaining entities” in the Longview Tax Administrator’s Guide. For more information on the LegalEntityGroupings_Parameters.csv import file, see “Preparing import files for legal entity grouping settings” in the Tax Provision Implementer’s Guide. For more information on the Tax Calculations tool, see “Running calculations” in the Longview Tax Administrator’s Guide.

Reviewing loss automation sample scenarios

Whether loss carryforward amounts are automated or not automated for an entity depends on the combination of settings for the entity as well as the entity’s net income before losses and membership in a legal entity grouping. Loss carryforward adjustment is calculated based on the following factors:

• The Use Loss Carryforward Automation system setting
• The Automate Loss Carryforward Adjustment setting of the legal entity
• The entity’s net income before losses
• Whether the entity belongs to a legal entity grouping or not
• The Loss Position setting of the legal entity grouping

Consider the following possible scenarios and results when the Use Loss Carryforward Automation system setting is TRUE:

The entities described and their settings are represented in the following table:

Note: The Use Loss Carryforward Automation system setting is TRUE.