Fin. Stmt Imbalances, Deferred Taxes, CU Balancing Adjustments 

Use

It may become necessary to manually and automatically post financial statement balancing adjustments, deferred income taxes, or clearing entries for financial statement imbalances. The system checks every manual and automatic posting document as to whether a balancing adjustment, a deferred tax entry, or a clearing entry is necessary and, if so, generates additional line items.

In manual entries, these generated line items are referred to as automatic line items because the system automatically adds them to your manually-entered line items.

The following table shows why and under which circumstances the system generates these additional line items:

Automatic line items are generated...	If these conditions are given…
For posting a balancing adjustment	An entry posted to balance sheet and income statement accounts leads to an imbalance in the financial statements
For posting deferred income tax	The given document type supports this feature and the entry affects earnings
To clear imbalances per consolidation unit when interunit entries are posted	Special clearing items are defined in the document type

Features

Financial statement imbalances, deferred income taxes or consolidation unit balancing adjustments are documented in more detail in the sections that follow. This section explains the functions that apply to all three types of additional line items.

Selected Items

To enable the system to generate individual line items for financial statement imbalances, deferred income tax and consolidation unit balancing adjustments, you need to define the following settings in the workbench:

·       Under Master Data ® Items ® Selected Items, you specify the items the system should post for financial statement imbalances and deferred income taxes.

You can define these selected items per document type. This overrides the global settings in the master data.

·       You set the following when maintaining document types (for example, document types for manual posting):

¡      The indicators Deferred Taxes – Debits or Deferred Taxes – Credits, as well as the tax rate in the master records of the consolidation units or in the document type

¡      If applicable, the selected items for deferred income taxes and financial statement imbalances (see note earlier)

¡      The selected clearing item for adjusting the balance for consolidation units

Subassignments for These Selected Items

You define the selected items for financial statement imbalances, deferred taxes and clearing imbalances for consolidation units in the workbench under Selected Items or in the definition of document types. Depending on which breakdown category is used, these items may require a breakdown by subassignments.

Customizing offers you several ways of controlling how the system determines the subassignments for the selected items:

Selected Items for Financial Statement Balancing Adjustments

For each selected item that has one or more subassignments, you can select the Default indicator for each subassignment, and/or you can specify a value for the subassignment. The following, multi-level logic applies:

·       If the default indicator is not selected, you must enter the value for the subassignment. Then the system always posts this value as the subassignment for the selected item.

Exception: If the breakdown is optional, you do not have to enter the value. Then the system leaves the value of the subassignment initialized.

·       If the default indicator is selected, you are not required to value for the subassignment.

The system uses the following steps to determine the subassignment: This figure illustrates these steps from a) to d):

Explanations:

...

                        a.     First, the system attempts to determine the subassignment based on the document.

                        b.     If step (a) is unsuccessful, the system checks if you specified the subassignment for the selected item.

                        c.     If step (b) is not applicable, the system uses the subassignment you defined in Customizing for Default Values.

                        d.     If step (c) is unsuccessful and the breakdown category shows that the subassignment is a required breakdown, then the system produces an error message.

Step (a) – using the document to determine the subassignment – is possible if:

§       The subassignment is unique within the document, which means that the same value is posted for this subassignment in all line items.

§       For each subassignment, the document is dismantled into subdocuments and the balance for all balance sheet and income statement items equals zero (see also the figure for the clearing item example).

Selected Items for Deferred Income Tax

The system logic for determining the subassignment for selected items for deferred income tax is the same as for selected items for financial statement imbalances. When posting the system first checks whether the selected items are defined for the document type, and determines the subassignments in the same way described earlier.

If the selected items are not defined per document type, then the system uses the (global) customizing settings (which are located at Master Data ® Items ® Selected Items).

 

 

Selected Item for Clearing (Clearing Imbalances per Consolidation Unit)

Selected items for clearing are always defined for each document type. The system logic for determining subassignments is the same as for selected items for financial statement imbalances and deferred income tax.

In the illustrated example, the system is able to determine the following partner units from the document in step a):

§       Partner B in line item 3

§       Partner A in line item 4

The subassignment divides the document into two subsets, each of which has a balance of zero across all financial statement items.

Manual Posting: Auxiliary Functions for Automatic Line Items

Simulation

When you manually post and save a document, the system generates the automatic line items and writes the entire document to the database. You can simulate the posting prior to actually saving the document. The simulation shows you the automatic line items. This lets you preview whether and how the system will post balancing adjustments, deferred tax and/or clearing adjustments.

Identification

The system flags automatic line items in the document with a special number to let you differentiate them from your manually-entered line items:

 

Auto Field	Meaning
1	Automatic line item for financial statement imbalances
2	Automatic line item for deferred income tax
3	Automatic line item for clearings across different consolidation units

 

Manual Entry of, or Adjustment to, Automatic Line Items

You can suppress the automatic line items and manually enter your own line items. If you do this, the following rules apply:

·       When entering the line items manually, you must enter all "automatic" line items.

·       You need to enter the correct amounts. This means that:

¡      The net balances of the balance sheet items and the income statement items of the entire document must equal zero.

¡      You need to post the tax portion of the imbalance of the complete document to the selected items for deferred income tax.

Alternatively, you first can have the system simulate the automatic line items, and then modify these line items. For example, you could modify the subassignments or distribute the simulated amounts across different line items.