Skip to main content
insightsoftware Documentation insightsoftware Documentation
{%article.title%}
Published:
Was this article helpful?
0 out of 0 found this helpful

Understanding Interim calculations

Tax Provision provides the ability to prepare a provision based on year-to-date numbers and an interim provision based on an Interim Effective Rate approach. The interim provision process calculates the total interim tax and annualized effective tax rate for each entity.

When you are setting up the entities for the system, use the Calculate Interim legal entity setting to determine whether an entity is included in the calculation of an interim provision.

As with the standard provision process, automated and manual inputs to the interim tax calculation are required in functional currency, which can be translated into reporting currencies.

For an interim period, the full forecast provision includes the following:

  • Actuals values—Current year-to-date actual values.
  • Interim adjustments—Adjustment/difference between the forecast value and the current year-to-date value.
  • Forecast values—Sum of the actuals values and the interim adjustments.

Depending on the Interim Calculation Method that is selected for each account, the forecast values used in the interim effective rate approach are calculated using one of the following methods:

  • Prior Year—Calculates the projected value using the prior year ending balance for the permanent or temporary difference account. For example, if the prior year ending balance was $20,000 and the current year-to-date balance is $6,500, the interim adjustment value is $13,500 to ensure the forecast value is $20,000.
  • Annualize—Calculates the projected value by annualizing the current period-to-date balance for the permanent or temporary difference account. For example, if the time period is the first quarter and the value of an account at this point is 3,000, the interim adjustment value is $9,000 to ensure the annualized value is 12,000 (3,000 * 4).
  • Forecast—Calculates the forecast current year column value by using the balance of the forecast current year input. The value in the interim current year column equals the forecast current year input balance less the current year-to-date amount. For example, assuming the value of an account at the end of the first quarter is 5000, and the forecast current year input balance is 20000, the interim current year column is calculated as 20000 - 5000. The forecast value in the forecast current year column is 5000 + 15000.
  • Custom—If your company has set up any custom interim calculation methods, they appear in this list. For information on creating a custom interim calculation method, see the Tax Provision Implementer’s Guide.
  • No Calculation—No automation occurs, and you must input any adjustments to arrive at the forecast value.

The amounts are allocated between current and deferred based on the Allocation Method setting in the Interim Accounts editor. Depending on the Allocation Method selected for each account, the system allocates the Estimated Annualized Effective Tax Rate using one of the following methods:

  • Current—Amount is allocated to the Current column only.
  • Deferred—Amount is allocated to the Deferred column only.
  • Reversal—There is no impact to the total provision for this account, so the amount allocated to the current column is offset by the amount allocated to the deferred column.
  • No Allocation—Amount is treated as an exceptional item and does not impact the overall effective tax rate.

Users can then view the following reports to review all items that impact the overall provision and their allocation between current and deferred:

  • For ASC systems—The national and regional Forecast Tax Expense reports (NF0802 and RF0802).
  • For IAS systems—The national and regional Forecast Tax Expense reports (NF1802 and RF1802).

If users need to adjust the estimated annualized effective tax rate or exceptional items at the legal entity or consolidated entity level (where the sum of the individual entities does not provide the expected result for that group), they can use the following input apps:

  • For ASC systems—The national and regional ETR and Discrete Items Interim input apps (NF0803 and RF0803).
  • For IAS systems—The national and regional ETR and Exceptional Items Interim input apps (NF1803 and RF1803).

Once each entity's annualized effective tax is calculated, users can view the following reports to review the consolidated forecasted/interim tax and the overall estimated annualized effective tax rate for the period:

  • For ASC systems—The national and regional Consolidated Current Effective Rate Interim reports (NF0805 and RF0805) and Consolidated Deferred Effective Rate Interim reports (NF0806 and RF0806).
  • For IAS systems—The national and regional Consolidated Current Effective Rate Interim reports (NF1805 and RF1805) and Consolidated Deferred Effective Rate Interim reports (NF1806 and RF1806).

ASC systems include an additional step for the Interim Rate Change Type that you select for each entity in the Entities editor. The Tax Rate Change CY - Deferred Tax Expense element is calculated using one of the following methods and then transferred to the discrete item:

  • Actual—Amount is equal to the Deferred Tax Impact - Change in Tax Rates CY from actuals.
  • Forecast—Amount is equal to the Deferred Tax Impact - Change in Tax Rates CY from actuals plus Interim Deferred Tax Impact - Change in Tax Rates CY.
  • Prorate—Amount is equal to the Deferred Tax Impact - Change in Tax Rates CY from actuals plus Interim Deferred Tax Impact - Change in Tax Rates CY, allocated based off the current period divided by the total number of periods. (NetNRCCY_ASC + NetNRCCYRIP_ASC) * (Current Period / 12).

Once the interim provision has been calculated, the TARF process transfers the resulting values based on the mappings you have set up in the system. You can define TARF mappings using the Tax Account Rollforward editor and then define the set of TARF mappings to use by entity for interim periods using the TARF Interim Transfer Timeframe legal entity setting.
Published:

Understanding Interim calculations

Tax Provision provides the ability to prepare a provision based on year-to-date numbers and an interim provision based on an Interim Effective Rate approach. The interim provision process calculates the total interim tax and annualized effective tax rate for each entity.

When you are setting up the entities for the system, use the Calculate Interim legal entity setting to determine whether an entity is included in the calculation of an interim provision.

As with the standard provision process, automated and manual inputs to the interim tax calculation are required in functional currency, which can be translated into reporting currencies.

For an interim period, the full forecast provision includes the following:

  • Actuals values—Current year-to-date actual values.
  • Interim adjustments—Adjustment/difference between the forecast value and the current year-to-date value.
  • Forecast values—Sum of the actuals values and the interim adjustments.

Depending on the Interim Calculation Method that is selected for each account, the forecast values used in the interim effective rate approach are calculated using one of the following methods:

  • Prior Year—Calculates the projected value using the prior year ending balance for the permanent or temporary difference account. For example, if the prior year ending balance was $20,000 and the current year-to-date balance is $6,500, the interim adjustment value is $13,500 to ensure the forecast value is $20,000.
  • Annualize—Calculates the projected value by annualizing the current period-to-date balance for the permanent or temporary difference account. For example, if the time period is the first quarter and the value of an account at this point is 3,000, the interim adjustment value is $9,000 to ensure the annualized value is 12,000 (3,000 * 4).
  • Forecast—Calculates the forecast current year column value by using the balance of the forecast current year input. The value in the interim current year column equals the forecast current year input balance less the current year-to-date amount. For example, assuming the value of an account at the end of the first quarter is 5000, and the forecast current year input balance is 20000, the interim current year column is calculated as 20000 - 5000. The forecast value in the forecast current year column is 5000 + 15000.
  • Custom—If your company has set up any custom interim calculation methods, they appear in this list. For information on creating a custom interim calculation method, see the Tax Provision Implementer’s Guide.
  • No Calculation—No automation occurs, and you must input any adjustments to arrive at the forecast value.

The amounts are allocated between current and deferred based on the Allocation Method setting in the Interim Accounts editor. Depending on the Allocation Method selected for each account, the system allocates the Estimated Annualized Effective Tax Rate using one of the following methods:

  • Current—Amount is allocated to the Current column only.
  • Deferred—Amount is allocated to the Deferred column only.
  • Reversal—There is no impact to the total provision for this account, so the amount allocated to the current column is offset by the amount allocated to the deferred column.
  • No Allocation—Amount is treated as an exceptional item and does not impact the overall effective tax rate.

Users can then view the following reports to review all items that impact the overall provision and their allocation between current and deferred:

  • For ASC systems—The national and regional Forecast Tax Expense reports (NF0802 and RF0802).
  • For IAS systems—The national and regional Forecast Tax Expense reports (NF1802 and RF1802).

If users need to adjust the estimated annualized effective tax rate or exceptional items at the legal entity or consolidated entity level (where the sum of the individual entities does not provide the expected result for that group), they can use the following input apps:

  • For ASC systems—The national and regional ETR and Discrete Items Interim input apps (NF0803 and RF0803).
  • For IAS systems—The national and regional ETR and Exceptional Items Interim input apps (NF1803 and RF1803).

Once each entity's annualized effective tax is calculated, users can view the following reports to review the consolidated forecasted/interim tax and the overall estimated annualized effective tax rate for the period:

  • For ASC systems—The national and regional Consolidated Current Effective Rate Interim reports (NF0805 and RF0805) and Consolidated Deferred Effective Rate Interim reports (NF0806 and RF0806).
  • For IAS systems—The national and regional Consolidated Current Effective Rate Interim reports (NF1805 and RF1805) and Consolidated Deferred Effective Rate Interim reports (NF1806 and RF1806).

ASC systems include an additional step for the Interim Rate Change Type that you select for each entity in the Entities editor. The Tax Rate Change CY - Deferred Tax Expense element is calculated using one of the following methods and then transferred to the discrete item:

  • Actual—Amount is equal to the Deferred Tax Impact - Change in Tax Rates CY from actuals.
  • Forecast—Amount is equal to the Deferred Tax Impact - Change in Tax Rates CY from actuals plus Interim Deferred Tax Impact - Change in Tax Rates CY.
  • Prorate—Amount is equal to the Deferred Tax Impact - Change in Tax Rates CY from actuals plus Interim Deferred Tax Impact - Change in Tax Rates CY, allocated based off the current period divided by the total number of periods. (NetNRCCY_ASC + NetNRCCYRIP_ASC) * (Current Period / 12).

Once the interim provision has been calculated, the TARF process transfers the resulting values based on the mappings you have set up in the system. You can define TARF mappings using the Tax Account Rollforward editor and then define the set of TARF mappings to use by entity for interim periods using the TARF Interim Transfer Timeframe legal entity setting.
For an optimal Community experience, Please view on Desktop