Deferred Taxes 

Use

Because of the tasks performed in consolidation, the consolidated earnings for the year usually differ from the sum of the earnings reported by the individual consolidation units. Deferred income taxes are posted within the consolidated financial statements in order to adjust the sum of all tax expenditures reported in the individual statements to consolidated earnings.

The system provides an option to automatically calculate and post deferred income taxes.

Prerequisites

In Customizing, you can activate the feature for posting deferred income tax for individual document types.

You have defined that the tax rate is read either from the master data of the consolidation unit or from the document type.

You have defined the selected items for deferred taxes – either globally in the master data or in the document type.

Features

Deferred income taxes can arise from standardizing entries posted to the reported financial data of consolidation units, or they can arise from consolidation entries.

The system posts deferred income taxes provided you have activated the function in Customizing, and a financial statement imbalance occurs during an entry. The financial statement imbalance is multiplied by the tax rate. The resulting deferred income tax is posted to the consolidation unit to which the financial statement imbalance itself is posted.

Example

You want to post a standardizing entry to a balance sheet item. You use a document type that provides for posting of deferred income tax. After the standardizing entry is posted, the balance sheet and the income statement are no longer in balance.

The following illustration shows you how the accounts are affected by the original entry, the automatic financial statement balancing adjustment, and the automatic entry for deferred income taxes.

·       Prior to posting the deferred income taxes, the financial statement imbalance amounts to 1000 currency units.

·       The system multiplies the financial statement imbalance by a tax rate of 60% and posts the resulting deferred income taxes of 600 currency units. The financial statement imbalance remaining to be posted is 400 currency units.

·       The remaining financial statement imbalance of 400 currency units is posted.