Understanding deferred tax automation

The ending cumulative temporary difference can be automatically calculated for entities by account. The following Deferred Tax Automation methods are available to automate the ending cumulative temporary difference:

• The Temporary Difference Method defines the book-tax basis difference and the portion of the book-tax basis difference that may be permanent in nature by using each temporary difference account to calculate the ending cumulative temporary difference.
• The accounting basis and tax basis can be automated using the Temporary Difference automation settings or by manually inputting by each temporary difference account. The amount automated as the ending balance is derived from the tax basis minus the accounting basis minus the portion of the book-tax basis difference that is permanent in nature, calculated at the account level.
• The Balance Sheet Method defines the book-tax basis difference and the portion of the book-tax basis difference that may be permanent in nature by using each account in the chart of accounts to calculate the ending cumulative temporary difference. The accounting basis and tax basis are submitted by each account in the chart of accounts. You can select the account from the chart of accounts using the Balance Sheet automation settings to define this amount as the automated ending balance.
• The No Automation Method requires users to manually input activity to ensure the ending cumulative temporary difference is correct. The ending cumulative temporary difference is not automatically calculated.

The Current Tax Automation also impacts the Deferred Tax Automation.

The Deferred Tax Automation calculation is the result of the following related settings:

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

Making manual adjustments and viewing deferred tax automation amounts

Depending on the method your system uses, you can make manual adjustments and view deferred tax automation amounts in different input apps and reports.

Using the Temporary Difference Method

After you load the chart of accounts data in the system, you can make manual adjustments to the accounting basis and tax basis in the following input app for both ASC and IAS systems:

• XCCC401 - Book Chart of Accounts Adjustments

You can view chart of accounts amounts in the following reports for both ASC and IAS systems:

• NCC003 - Book Balance Sheet by Reporting Method
• NCC004 - Book Income Statement by Reporting Method

You can automate the accounting basis and/or the tax basis from the chart of accounts into the temporary difference accounts. You can view automated amounts and make manual adjustments to the temporary difference accounts for the accounting basis, tax basis, and the permanent portion of the book-tax basis in the following input apps:

For ASC systems:

• NA0301 - Temporary Differences
• Provision
  • RA0301 - Temporary Differences
• Multi-Regional Provision
  • SS0301 – Temporary Differences - Tabbed
  • SS0301 – Temporary Differences
  • SG0301 – Temporary Differences

For IAS systems:

• NA1301 - Temporary Differences
• Provision
  • RA1301 - Temporary Differences

• Multi-Regional Provision
  • SS1301 – Temporary Differences - Tabbed
  • SS1301 – Temporary Differences
  • SG1301 – Temporary Differences

You can view the automated and manual amounts for the accounting basis, tax basis, and permanent portion of the book-tax basis in the following reports:

For ASC systems:

• NA0300 - Deferred Tax Proof
• Provision
  • RA0300 - Deferred Tax Proof

For IAS systems:

• NA1300 - Deferred Tax Proof
• Provision
  • RA1300 - Deferred Tax Proof

You can automate the ending balance as the accounting basis less the tax basis and the permanent portion of the book-tax basis. You can view the automated ending balances and make manual adjustments for the ending cumulative temporary difference in the following input apps:

For ASC systems:

• NA0301 - Temporary Differences
• Provision
• Multi-Regional Provision
  • SS0301 – Temporary Differences - Tabbed
  • SS0301 – Temporary Differences
  • SG0301 – Temporary Differences

You can view automated and manual amounts for the ending cumulative temporary difference in the following reports:

For ASC systems:

• NA0301 - Temporary Differences
• Provision
  • RA0301 - Temporary Differences
• Multi-Regional Provision
  • SA0301S – Temporary Differences
  • SA0301G – Temporary Differences

For IAS systems:

• NA1301 - Temporary Differences
• RA1301 - Temporary Differences 

Using the Balance Sheet Method

After you load the chart of accounts data in the system, you can make manual adjustments to the accounting basis, statutory basis, and tax basis in the following input app for both ASC and IAS systems:

• XCCC401 - Book Chart of Accounts Adjustments

You can view automated and manual amounts for the accounting basis, statutory basis, tax basis, and the difference between each for the chart of accounts in the following reports for both ASC and IAS systems:

• NCC003 - Book Balance Sheet by Reporting Method
• NCC004 - Book Income Statement by Reporting Method

You can automate the result of the accounting basis less the tax basis from the chart of accounts to the temporary difference accounts and make this amount the ending balance. You can view automated ending balances and make manual adjustments for the ending cumulative temporary difference in the following input apps:

For ASC systems:

• NA0301 - Temporary Differences
• RA0301 - Temporary Differences

For IAS systems:

• NA1301 - Temporary Differences
• RA1301 - Temporary Differences

You can view the automated and manual amounts for the ending cumulative temporary difference in the following reports:

For ASC systems:

• NA0321 - Temporary Differences - Balance Sheet Method
• Provision
  • RA0321 - Temporary Differences - Balance Sheet Method

For IAS systems:

• NA1321 - Temporary Differences - Balance Sheet Method
• Provision
  • RA1321 - Temporary Differences - Balance Sheet Method 

Understanding deferred tax automation system settings

You can automatically calculate the ending cumulative temporary difference for entities by account using the following system settings:

• Use Deferred Tax Automation - Automation Method
• Use Deferred Tax Automation - Display Automation Settings
• Entity Default Setting for Automation of Temporary Difference Ending Balances
• Account Default Setting for Automation of Temporary Difference Ending Balances 

Use Deferred Tax Automation - Automation Method system setting

The Deferred Tax Automation - Automation Method system setting must be set to Temporary Difference or Balance Sheet to enable the automation of the ending cumulative temporary difference.

The Temporary Difference option automates the ending balances as the tax basis less the accounting basis less the permanent portion of the book-tax basis. The permanent portion of the book-tax basis is derived from each temporary difference account. You can manually input the permanent portion of the book-tax basis to each temporary difference account. The tax basis and accounting basis can be manually input or automated from a source area. The source area is derived from an account in the chart of accounts and multiplied by a percentage, both of which are defined using the temporary difference automation settings.

The Balance Sheet option automates the ending balance to be equal to a source area. The source area is multiplied by a percentage, both of which are defined using the balance sheet automation settings. The source area is automated from the chart of the accounts and the difference between the tax basis and the accounting basis.

Depending on other settings as described in Reviewing deferred tax automation setting combinations, the amount used to automate the ending balance is calculated into either a current year column or unexplained difference column for both the Temporary Difference and Balance Sheet options.

The No Automation option does not automate the ending cumulative temporary difference.

You can set the Deferred Tax Automation - Automation Method system setting using 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.

Use Deferred Tax Automation - Display Automation Settings system setting

This setting is available in the System Settings editor only if the Deferred Tax Automation - Automation Method system setting is set to No Automation.

The Deferred Tax Automation - Display Automation Settings setting activates the settings related to Balance Sheet and Temporary Difference so you can set these options without automating the ending cumulative temporary difference. If Deferred Tax Automation - Display Automation Settings is set to Hide Settings, the ending cumulative temporary difference is not automated, and the settings related to Balance Sheet and Temporary Difference are not available. You can set the Deferred Tax Automation - Display Automation Settings setting using 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 Temporary Difference Ending Balances symbol default system setting

This setting specifies whether the Automate Deferred Tax Amounts setting is selected or cleared by default in the Entities editor. If the Entity Default Setting for Automation of Temporary Difference Ending Balances setting is set to TRUE, the Automate Deferred Tax Amounts setting is selected by default in the Entities editor when a new entity is created. If the Entity Default Setting for Automation of Temporary Difference Ending Balances setting is set to FALSE, the Automate Deferred Tax Amounts 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 Temporary Difference Ending Balances 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 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.

Account Default Setting for Automation of Temporary Difference Ending Balances symbol default system setting

This setting is available in the System Settings editor only if the Deferred Tax Automation - Automation Method system setting is set to Temporary Difference.

This setting specifies whether the Automate Temporary Difference Ending Balances setting is selected or cleared by default in the Current and Deferred Tax editor. If the Account Default Setting for Automation of Temporary Difference Ending Balances setting is set to TRUE, the Automate Temporary Difference Ending Balances setting is selected by default in the Current and Deferred Tax editor when a new temporary difference account is created using the Book-Tax Differences editor. If the Account Default Setting for Automation of Temporary Difference Ending Balances setting is set to FALSE, the Automate Temporary Difference Ending Balances setting is cleared by default in the Current and Deferred Tax editor when a new temporary difference account is created using the Book-Tax Differences editor.

You can set the Account Default Setting for Automation of Temporary Difference Ending Balances 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 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.

Understanding deferred tax automation legal entity settings

You can automatically calculate the ending cumulative temporary difference for entities by account using the Automate Deferred Tax Amounts legal entity setting.

Automate Deferred Tax Amounts legal entity setting

This setting is available in the Entities editor only if the Deferred Tax Automation - Automation Method system setting is set to Balance Sheet or Temporary Difference, or if the Deferred Tax Automation - Display Automation Settings system setting is set to Display Balance Sheet Method Settings or Display Temporary Difference Method Settings.

The Automate Deferred Tax Amounts legal entity setting must be set to TRUE to enable the automation of the ending cumulative temporary difference for a legal entity. If the Automate Deferred Tax Amounts setting is set to FALSE, the ending cumulative temporary difference is not calculated for the entity. You can set the Automate Deferred Tax Amounts legal entity setting using either the Total Entities page of the 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.

Understanding Temporary Difference Method settings

The following settings are applicable only if your system is set to use the Temporary Difference Method. For more information on using the Temporary Difference Method, see Use Deferred Tax Automation - Automation Method system setting.

Automate Temporary Difference Ending Balances - Temporary Difference Method account setting

The Automate Temporary Difference Ending Balances account setting is available only if Deferred Tax Automation - Automation Method is set to Temporary Difference or the Deferred Tax Automation - Display Automation Settings system setting is set to Display Temporary Difference Method Settings.

The Automate Temporary Difference Ending Balances setting must be set to TRUE to enable the automation of the ending cumulative temporary difference for an account. The ending balance is automated as the tax basis less the accounting basis less the permanent portion of the book-tax basis. Depending on other settings as described in Reviewing deferred tax automation setting combinations, the calculated amount used to automate the ending balance flows through to either a current year column or an unexplained column in the temporary difference report. If the Automate Temporary Difference Ending Balances setting is set to FALSE, the ending cumulative temporary difference is not calculated for the account. Instead, the system uses the Tax Basis Calculation to calculate the amount in the Accounting Basis - Calc element in the deferred tax proof report. Using the Tax Basis Calculation ensures the ending balance is the tax basis less the accounting basis less the permanent portion of the book-tax basis. You can set the Automate Temporary Difference Ending Balances account setting using the Current and Deferred Tax editor or the CurrentAndDeferredTax_Parameters.csv import file.

For more information on the settings used to define the source area using the Current and Deferred Tax editor, see “Maintaining Tax Provision accounts” in the Longview Tax Administrator’s Guide. For more information on the settings used to define the source area in the Current and Deferred Tax Parameters import file, see “Preparing import files for account settings” in the Tax Provision Implementer’s Guide.

Automate Accounting Basis account setting

The Automate Accounting Basis account setting is available only if the Deferred Tax Automation - Automation Method setting is set to Temporary Difference or the Deferred Tax Automation - Display Automation Settings system setting is set to Display Temporary Difference Method Settings.

The Automate Accounting Basis account setting must be set to TRUE to enable the automation of the accounting basis amount for an account. Once the Automate Accounting Basis setting is set to TRUE, you must define the source area of the automation using other enabled settings. The Accounting Basis - Calc element is automated in the deferred tax proof report and is the source area multiplied by a percentage, both of which are defined using the temporary difference automation settings. If the Automate Accounting Basis setting is set to FALSE, the accounting basis is not calculated for the account. You can set the Automate Accounting Basis account setting using the Current and Deferred Tax editor or the CurrentAndDeferredTax_Parameters.csv import file.

For more information on the settings used to define the source area using the Current and Deferred Tax editor, see “Maintaining Tax Provision accounts” in the Longview Tax Administrator’s Guide. For more information on the settings used to define the source area in the Current and Deferred Tax Parameters import file, see “Preparing import files for account settings” in the Tax Provision Implementer’s Guide.

Automate Tax Basis account setting

The Automate Tax Basis setting is available only if Automate Temporary Difference Ending Balances is set to TRUE.

The Automate Tax Basis setting must be set to TRUE to enable automation of the tax basis amount for an account. Once the Automate Tax Basis setting is set to TRUE, you must define the source area of the automation using other enabled settings. The STAT/Tax Basis - Calc element is automated in the deferred tax proof report and is the source area multiplied by a percentage, both of which are defined using the temporary difference automation settings. If the Automate Tax Basis setting is set to FALSE, the tax basis is not calculated for the account. You can set the Automate Tax Basis account setting using the Current and Deferred Tax editor or the CurrentAndDeferredTax_Parameters.csv import file.

For more information on the settings used to define the source area using the Current and Deferred Tax editor, see “Maintaining Tax Provision accounts” in the Longview Tax Administrator’s Guide. For more information on the settings used to define the source area in the Current and Deferred Tax Parameters import file, see “Preparing import files for account settings” in the Tax Provision Implementer’s Guide.

Override Default Setting account setting by entity

The Override Default Settings account setting is available only for entities other than Dim2Set - Entities Default.

The Override Default Settings account setting must be set to TRUE to enable the Automate Temporary Difference Ending Balances, Automate Accounting Basis, and Automate Tax Basis settings for an account. Once the Override Default Settings account setting is set to TRUE, the system ignores the default settings for the account and uses the specified settings. If the Override Default Settings account setting is set to FALSE, the system uses the default settings for the account. You can set the Override Default Settings account setting using the Current and Deferred Tax editor or the CurrentAndDeferredTax_Parameters.csv import file.

For more information on the Current and Deferred Tax editor, see “Maintaining Tax Provision accounts” in the Longview Tax Administrator’s Guide. For more information on the Current and Deferred Tax Parameters import file, see “Preparing import files for account settings” in the Tax Provision Implementer’s Guide.

Understanding Balance Sheet Method settings

The following settings are applicable only if your system is set to use the Balance Sheet Method. For more information on using the Balance Sheet Method, see Use Deferred Tax Automation - Automation Method system setting.

Automate Temporary Difference Ending Balances account setting

The Automate Temporary Difference Ending Balances account setting is available only if the Deferred Tax Automation - Automation Method setting is set to Balance Sheet or the Deferred Tax Automation - Display Automation Settings system setting is set to Display Balance Sheet Method Settings.

The Automate Temporary Difference Ending Balances setting must be set to TRUE to enable the automation of the ending cumulative temporary difference for an account. Once the Automate Temporary Difference Ending Balances setting is set to TRUE, you must define the source area of automation using other enabled settings. The automation of the ending balance is the defined source area multiplied by a percentage, both of which are defined using the balance sheet automation settings. Depending on other settings as described in Reviewing deferred tax automation setting combinations, the calculated amount used to automate the ending balance flows into either a current year column or an unexplained column in the temporary difference report. If Automate Temporary Difference Ending Balances is set to FALSE, the ending cumulative temporary difference is not calculated for the account. You can set the Automate Temporary Difference Ending Balances account setting using the Current and Deferred Tax editor or the CurrentAndDeferredTax_Parameters.csv import file.

For more information on the settings used to define the source area using the Current and Deferred Tax editor, see “Maintaining Tax Provision accounts” in the Longview Tax Administrator’s Guide. For more information on the settings used to define the source area using the Current and Deferred Tax Parameters import file, see “Preparing import files for account settings” in the Tax Provision Implementer’s Guide.

Override Default Setting account setting by entity

The Override Default Settings account setting is available only for entities other than Dim2Set - Entities Default.

The Override Default Settings account setting must be set to TRUE to enable the Automate Temporary Differences Ending Balances setting for an account. Once Override Default Settings is set to TRUE, the system ignores the default settings for the account and uses the specified settings. If Override Default Settings is set to FALSE, the system uses the default settings for the account. You can set the Override Default Settings account setting using the Current and Deferred Tax editor or the CurrentAndDeferredTax_Parameters.csv import file.

For more information on the Current and Deferred Tax editor, see “Maintaining Tax Provision accounts” in the Longview Tax Administrator’s Guide. For more information on the Current and Deferred Tax Parameters import file, see “Preparing import files for account settings” in the Tax Provision Implementer’s Guide.

Reviewing deferred tax automation setting combinations

Whether ending balance amounts are automated or not automated and the element to which the automated amount is submitted for an account and entity depends on the combination of settings for both the account and the entity. Ending balance automation is calculated based on the following factors:

• The Deferred Tax Automation - Automation Method system setting
• The Automate Deferred Tax Amounts legal entity setting
• The Override Default Settings account setting by entity
• The Current Tax Automation - Allow Automation of Current Tax system setting
• The Automate Current Tax Amounts legal entity setting
• The Automate Current Tax Amount account setting
• The Automate Current Tax Amounts account setting by entity
• The account classification (Income/Equity/OCI)
• The type of account (deferred tax leaf or temporary difference)

For the Temporary Difference Method only:

• The Automate Temporary Difference Ending Balances - Temporary Difference Method account setting
• The Automate Temporary Difference Ending Balances - Temporary Difference Method account setting by entity

For the Balance Sheet Method only:

• The Automate Temporary Difference Ending Balances account setting
• The Automate Temporary Difference Ending Balances account setting by entity

Reviewing deferred tax automation sample scenarios

Consider the following possible scenarios and results when the Deferred Tax Automation - Automation Method system setting is Temporary Difference or Balance Sheet:

Note: If the Override Default Settings account setting is set to TRUE, the Automate Temporary Difference Ending Balances setting at the entity level overrides the global settings.

The entities and accounts described are represented in the following table:

Note: The Deferred Tax Automation - Automation Method system setting is Temporary Difference or Balance Sheet.

Reviewing Accounting Basis and Tax Basis automation setting combinations

The combination of the following settings determines whether the Accounting Basis and Tax Basis are automated or not automated when the Deferred Tax Automation - Automation Method setting is Temporary Difference.

Note: When the Deferred Tax Automation - Automation Method setting is Balance Sheet, the Accounting Basis element is not automated, and the Tax Basis element is the result of the Tax Basis Calculation.

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