Algorithm for deferred taxes
Deferred tax amount calculation¶
To determine the deferred tax amount, CCH Tagetik follows the following process:
| Step | Description |
|---|---|
| 1 | Sums up amounts on sensitive balance sheet accounts. |
| 2 | Changes the amount’s sign. |
| 3 | Multiplies the amount obtained by the tax rate of the current scenario. |
| 4 | - Performs target matching on the debit and credit balance sheet accounts equal to the value of the tax on the “Deferred taxes fund” account or the “Credits for prepaid taxes” account (debit or credit based on the sign) configured in the tax rule and target matching to zero on the other account. |
| 5 | Moves the “annual impact” variation onto the balance sheet account for the year. Or moves the Debits for deferred taxes - annual impact account (debit or credit based on the sign) or the Credits for prepaid taxes - annual impact (debit or credit based on the sign) of an amount equal to the sum, with the opposite sign, of the amounts of the sensitive accounts (both for the year and carried forward) multiplied by the year’s calculation percentage. |
| 6 | Moves the “% variance” variation onto the opening balance sheet account. Or moves the Debits for deferred taxes - % variance account (debit or credit based on the sign) or the Credits for prepaid taxes - % variance (debit or credit based on the sign) of an amount equal to the sum, with the opposite sign, of the amounts of the sensitive accounts carried forward multiplied by the difference between the year’s calculation percentage and the opening calculation percentage. |
| 7 | Moves the “annual impact” variation onto the opening accounts. Or adjusts the fund or credits account calculated in the previous year and carried forward. The amount to be adjusted is equal to the sum of the sensitive accounts with origin “PREL_RESTORE” multiplied by the year’s calculation percentage. |
| 8 | Generates the P&L contra-entry by adjusting the following accounts: - the “Deferred taxes - annual impact” account (debit or credit based on the sign) with an amount equal to the sum of the sensitive accounts adjusted in the year by the tax rate for the year. - the “Deferred taxes - % variance” account (debit or credit based on the sign) with an amount equal to the sum of the sensitive accounts carried forward for the difference between the tax rate for the year and the opening tax rate. |
All the generated rows are attributed to the reference entity for the tax calculation. The reference entity is determined based on the tax calculation methods for the journals while for amounts it is the entity itself. In those rows, the counterparty entity is never defined.
All the rows generated by the deferred taxes calculation have the origin PROC_DEFERRED_TAXES.
Example
In the following typical case, there are the following conditions:
- tax rate for year n - 1 = 30%
- tax rate for year n = 40%
- debit sign = +
- Depreciation fund = account sensitive to tax
Journal year n-1.
| Account | Amount | Data origin |
|---|---|---|
| Depreciation (P&L) | 100 | INPUT_WEB |
| Depreciation fund (BS) | -100 | INPUT_WEB |
Result after deferred taxes calculation year n-1
| Account | Amount | Data origin |
|---|---|---|
| Depreciation (P&L) | 100 | INPUT_WEB |
| Depreciation fund (BS) | -100 | INPUT_WEB |
| Credits for prepaid taxes | 30 | PROC_DEFERRED_TAXES |
| Credits for prepaid taxes debit - annual impact | 30 | PROC_DEFERRED_TAXES |
| Deferred taxes: credit - annual impact | -30 | PROC_DEFERRED_TAXES |
Output account overrides¶
In the presence of overrides on output accounts, the deferred taxes data processing behaves as follows:
- For sensitive normal accounts that do not have overrides, the output accounts defined in the general rule are used.
- For sensitive normal accounts with overrides, the overridden output accounts are used: the calculation is run by fiscal policy / tax / sensitive account.
In the presence of overrides on output accounts on normal accounts, the amount whose sign is checked to choose between Credit/Debit accounts and debit/credit is the amount of the tax for the overridden sensitive account.
For variation accounts that are children of sensitive normal accounts and have a variation/detail type override, the System searches for the variations of the Process, in which the normal Credit/Fund account is the parent (of the general rules or overridden on the parent account) and runs the calculation of the amount of the annual impact of the tax. In practice, a reclassification between the generic variation and the overridden variation is carried out since the generic variation is already defined on the basis of the normal account.