Understanding Interim ETR

Interim ETR amounts can be calculated for entities at a legal entity, sub-consolidated, or consolidated level. When calculating the interim effective tax rate at a sub-consolidated or consolidated parent level, the legal entities are adjusted to match the parent entity’s ETR, unless they are excluded from the ETR calculation.

The calculation of the interim ETR is a result of the following system settings:

• The Entity Level for Interim ETR system setting
• The Consolidation/Sub-Consolidation Hierarchy for Interim ETR system setting
• The Entity Default Setting for Calculate Interim symbol default setting
• The Entity Default Setting for Entity Level for Interim ETR symbol default setting

If the Entity Level for Interim ETR system setting is set to Defined by Entity, the following settings are also considered:

• The Calculate Interim legal entity setting
• The Entity Level for Interim ETR legal entity setting
• The Sub-Consolidation Entity for Interim ETR legal entity setting
• The Include in National Current Interim ETR legal entity setting
• The Include in National Deferred Interim ETR legal entity setting
• The Include in Regional Current Interim ETR legal entity setting
• The Include in Regional Deferred Interim ETR legal entity setting

This section explains how the combination of these settings affects the estimated annualized effective tax rate, including the various possible scenarios.

Viewing effective tax rate amounts

Users can review the consolidated effective tax rate amounts in the following reports: 

• For ASC systems — Consolidated Current Effective Rate Interim (NF0805/RF0805) and Consolidated Deferred Effective Rate Interim (NF0806/RF0806)
• For IAS systems — Consolidated Current Effective Rate Interim (NF1805/RF1805) and Consolidated Deferred Effective Rate Interim (NF1806/RF1806)

Users can make manual adjustments using the following input apps, and then view their adjustments using the corresponding reports:

• For ASC systems — ETR and Discrete Items Interim (NF0803/RF0803)
• For IAS systems — ETR and Exceptional Items Interim (NF1803/RF1803)

The following accounts store the effective tax rate amounts:

NatIPETRCURC — Interim Current ETR Calculated
NatIPETRCURCA — Interim Current ETR - Consolidation Adjustment
NatIPETRCURA — Interim Current ETR - Manual Adjustment
NatIPETRCUR — Interim Current ETR Adjusted

NatIPETRDFRC — Interim Deferred ETR Calculated
NatIPETRDFRCA — Interim Deferred ETR - Consolidation Adjustment
NatIPETRDFRA — Interim Deferred ETR - Manual Adjustment
NatIPETRDFR — Interim Deferred ETR Adjusted

RegIPETRCURC — Regional Interim Current ETR Calculated
RegIPETRCURCA — Regional Interim Current ETR - Consolidation Adjustment
RegIPETRCURA — Regional Interim Current ETR - Manual Adjustment
RegIPETRCUR — Regional Interim Current ETR Adjusted

RegIPETRDFRC — Regional Interim Deferred ETR Calculated
RegIPETRDFRCA — Regional Interim Deferred ETR - Consolidation Adjustment
RegIPETRDFRA — Regional Interim Deferred ETR - Manual Adjustment
RegIPETRDFR — Regional Interim Deferred ETR Adjusted

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 interim effective tax rate system settings

You can define the way the system calculates the interim effective tax rate for entities using the following system settings:

• The Entity Level for Interim ETR
• The Consolidation/Sub-Consolidation Hierarchy for Interim ETR
• The Entity Default Setting for Calculate Interim 
• The Entity Default Setting for Entity Level for Interim ETR

You can set the system settings using the System Settings editor or the System_Settings.csv import file. For more information on the System Settings editor, see the Longview Tax Administrator's Guide. For more information on the System Settings import file, see the Tax Provision Implementer's Guide.

Entity Level for Interim ETR system setting

The Entity Level for Interim ETR setting determines the consolidation level at which the ETR is calculated.

If you select Legal Entity for this setting, the ETR is calculated at the leaf entity level and the system considers the Calculate Interim legal entity setting.

If you select Sub-Consolidated for this setting, the ETR is calculated for groups of entities. When using this option, you must select the parent at which to calculate the ETR for each entity by setting the Sub-Consolidation Entity for Interim ETR in the Entities editor. The parents available for selection are determined by the hierarchy defined by the Consolidation/Sub-Consolidation Hierarchy for Interim ETR system setting. When you use this setting, the system also takes the following settings into account:

• The Calculate Interim legal entity setting
• The Sub-Consolidation Entity for Interim ETR legal entity setting
• The Include in National Current Interim ETR legal entity setting
• The Include in National Deferred Interim ETR legal entity setting
• The Include in Regional Current Interim ETR legal entity setting
• The Include in Regional Deferred Interim ETR legal entity setting

If you select Consolidated for this setting, the ETR is calculated for all entities. The parent at which to calculate the ETR for all entities is defined by the Consolidation/Sub-Consolidation Hierarchy for Interim ETR system setting. When you use this setting, the system also takes the following settings into account:

• The Calculate Interim legal entity setting
• The Include in National Current Interim ETR legal entity setting
• The Include in National Deferred Interim ETR legal entity setting
• The Include in Regional Current Interim ETR legal entity setting
• The Include in Regional Deferred Interim ETR legal entity setting

If you select Defined by Entity for this setting, the ETR can be calculated at the leaf entity level for some entities and calculated for groups of entities for other entities. When you use this setting, the system also takes the following settings into account: 

• The Calculate Interim legal entity setting
• The Entity Level for Interim ETR legal entity setting
• The Sub-Consolidation Entity for Interim ETR legal entity setting
• The Include in National Current Interim ETR legal entity setting
• The Include in National Deferred Interim ETR legal entity setting
• The Include in Regional Current Interim ETR legal entity setting
• The Include in Regional Deferred Interim ETR legal entity setting

Consolidation/Sub-Consolidation Hierarchy for Interim ETR system setting

This setting is available in the System Settings editor only if the Entity Level for Interim ETR system setting is set to Sub-Consolidated, Consolidated, or Defined by Entity. If the Entity Level for Interim ETR system setting is set to Consolidated, this setting is the parent that is used to calculate the ETR. If it is set to Sub-Consolidated, this setting determines the hierarchy that displays (and therefore the symbols available for selection) for the Sub-Consolidation Entity for Interim ETR in the Entities editor.

Entity Default Setting for Calculate Interim symbol default system setting

This setting specifies whether the Calculate Interim setting is selected or cleared by default in the Entities editor. If Entity Default Setting forCalculate Interim is set to TRUE, the Calculate Interim setting is selected by default in the Entities editor when you add a new entity to the system. If Entity Default Setting for Calculate Interim is set to FALSE, the Calculate Interim setting is cleared by default in the Entities editor when you add a new entity to the system.

Entity Default Setting for Entity Level for Interim ETR symbol default system setting

This setting is available in the System Settings editor only if the Entity Level for Interim ETR system setting is set to Defined by Entity. This setting specifies whether Entity Level for Interim ETR is set to Legal Entity or Sub-Consolidated by default in the Entities editor when you add a new entity to the system.

Understanding interim effective tax rate entity settings

You can define the way the system calculates the interim effective tax rate for entities using the following entity settings:

• The Calculate Interim legal entity setting
• The Entity Level for Interim ETR legal entity setting
• The Sub-Consolidation Entity for Interim ETR legal entity setting
• The Include in National Current Interim ETR legal entity setting
• The Include in National Deferred Interim ETR legal entity setting
• The Include in Regional Current Interim ETR legal entity setting
• The Include in Regional Deferred Interim ETR legal entity setting

You can set the system settings using the System Settings editor or the System_Settings.csv import file. For more information on the System Settings editor, see the Longview Tax Administrator's Guide. For more information on the System Settings import file, see the Tax Provision Implementer's Guide.

Calculate Interim legal entity setting

You must select the Calculate Interim legal entity setting to enable the calculation of the interim effective tax rate for a legal entity. If the Calculate Interim setting is cleared, the system does not calculate an interim effective tax rate (ETR) for the entity.

Entity Level for Interim ETR legal entity setting

This setting is available in the Entities editor only if the Entity Level for Interim ETR system setting is set to Defined by Entity. This setting determines the consolidation level at which to calculate the interim ETR.

If this system setting is Legal Entity, the ETR is calculated at the leaf entity level.

If this system setting is Sub-Consolidated, the ETR is calculated for groups of entities. When using this option, you must select the parent at which to calculate the ETR for each entity by setting the Sub-Consolidation Entity for Interim ETR in the Entities editor. The parents available for selection are determined by the hierarchy defined by the Consolidation/Sub-Consolidation Hierarchy for Interim ETR system setting.

Sub-Consolidation Entity for Interim ETR legal entity setting

This setting is available in the Entities editor only if the Entity Level for Interim ETR system setting is set to Sub-Consolidated, or if the Entity Level for Interim ETR system setting is set to Defined by Entity and the Entity Level for Interim ETR entity setting is set to Sub-Consolidated. This setting defines the parent at which to calculate the ETR when using a Sub-Consolidated entity level.

Include in National Current Interim ETR legal entity setting

This setting is available in the Entities editor only if the Entity Level for Interim ETR system setting is set to Sub-Consolidated, Consolidated, or Defined by Entity. If the Entity Level for Interim ETR system setting is set to Legal Entity, the system ignores the Include in National Current Interim ETR and calculates the national current interim effective tax rate for the legal entity.

You must select the Include in National Current Interim ETR legal entity setting if you want the system to calculate the national current interim effective tax rate for a legal entity. If this setting is cleared, the system does not calculate the national current interim effective tax rate for the entity.

Include in National Deferred Interim ETR legal entity setting

This setting is available in the Entities editor only if the Entity Level for Interim ETR system setting is set to Sub-Consolidated, Consolidated, or Defined by Entity. If the Entity Level for Interim ETR system setting is set to Legal Entity, the system ignores the Include in National Deferred Interim ETR setting and calculates the national deferred interim effective tax rate for the legal entity.

You must select the Include in National Deferred Interim ETR legal entity setting to enable the calculation of the national deferred interim effective tax rate for a legal entity. If this setting is cleared, the system does not calculate the national deferred interim effective tax rate for the entity.

Include in Regional Current Interim ETR legal entity

This setting is available in the Entities editor only if the Entity Level for Interim ETR system setting is set to Sub-Consolidated, Consolidated, or Defined by Entity. If the Entity Level for Interim ETR system setting is set to Legal Entity, the system ignores the Include in Regional Current Interim ETR setting and calculates the regional current interim effective tax rate for the legal entity.

You must select the Include in Regional Current Interim ETR legal entity setting to enable the calculation of the regional current interim effective tax rate for a legal entity. If this setting is cleared, the system does not calculate the regional current interim effective tax rate for the entity.

Include in Regional Deferred Interim ETR legal entity

This setting is available in the Entities editor only if the Entity Level for Interim ETR system setting is set to Sub-Consolidated, Consolidated, or Defined by Entity. If the Entity Level for Interim ETR system setting is set to Legal Entity, the system ignores the Include in Regional Deferred Interim ETR setting and calculates the regional deferred interim effective tax rate for the legal entity.

You must select the Include in Regional Deferred Interim ETR legal entity setting to enable the calculation of the regional deferred interim effective tax rate for a legal entity. If this setting is cleared, the system does not calculate the regional deferred interim effective tax rate for the entity.

Understanding interim effective tax rate calculation formulas

This section describes how the Interim Current vs Deferred Rate Calculation (ASC/IAS) uses the interim ETR settings to calculate the appropriate account. For information on the interim ETR settings, see Understanding interim effective tax rate system settings and Understanding interim effective tax rate entity settings.

The format used is in the formulas is Account Name@Element Name.

National Current Interim ETR formula

The formula for the national current interim ETR is:

NatIPETRCurC@GrsCYCurFcst_ASC/IAS = NatCurrentIPDet_ASC/IAS@GRSCYCURFCST_ASC/IAS divided by NIBTAdj@GrsCYCurDfdFcstT_ASC/IAS multiplied by 100.

The following table indicates the affected accounts:

National Deferred Interim ETR formula

The formula for the national deferred interim ETR is:

NatIPETRDfrC@GrsCYDfdFcst_ASC/IAS = NatCurrentIPDet_ASC/IAS @GRSCYDFDFCST_ASC/IAS divided by NIBTAdj@GrsCYCurDfdFcstT_ASC/IAS multiplied by 100

The following table indicates the affected accounts:

Regional Current Interim ETR formula

The formula for the regional current interim ETR is:

RegIPETRCurC@GrsCYCurFcst_ASC/IAS = RegIP_ASC/IAS@GRSCYCURFCST_ASC/IAS divided by NIBTAdj@GrsCYCurDfdFcstT_ASC/IAS multiplied by 100.

The following table indicates the affected accounts:

Regional Deferred Interim ETR formula

The formula for the regional deferred interim ETR is:

RegIPETRDfrC@GrsCYDfdFcst_ASC/IAS = RegIP_ASC/IAS @GRSCYDFDFCST_ASC/IAS divided by NIBTAdj@GrsCYCurDfdFcstT_ASC/IAS multiplied by 100

The following table indicates the affected accounts: