Example 5: Percentage Reclassification of Tax Income

Initial Situation

You want to perform an elimination of investment income. In order to accurately report the group’s tax expenditures, you first reclassify the tax income (corporate income tax credit) for the consolidation unit that receives the credit before performing the elimination of investment income.

For the receipt of dividends, instead of recording the tax credit on a separate item, the respective parent unit discloses the tax credit on the item Investment Income .

You use the reclassification function to reclassify the tax income (in this case, a credit for corporate income tax) to a tax expense item.

The reclassification entry uses posting level 20.

Example Data

Consolidation unit A owns 80% of consolidation unit B.

Consolidation unit B distributes a dividend totaling 100 monetary units; thus, A receives 80 monetary units.

The tax rate for retained earnings is 50% for consolidation unit A.

The tax rate for distributed (paid out) earnings is 40% for consolidation unit A.

	Upper Unit A	Investee Unit B	Target: Recl. to A	Elim. of Invest. Income at A	Group
Sales		200-			200-
Expenses
Dividend Income	80-		32	48
Tax Expense		40 + 50 = 90	32-		58
Distribution of Dividends		100 - 40 = 60		48-	12
Retained Earnings	80-	50-			130-

Prerequisites

You have finished data collection, standardization of financial data, and currency translation.

Process Flow

A. Customizing

Define document type and task

Define a document type with posting level 20 (two-sided elimination entries).
Define a task for the reclassification.

Define method layout

Create a method layout for the reclassification, or use an existing one that has the following properties:

With a percentage rate
Without a condition
Without a source – the trigger and the source are the same
Without substeps

Define in ...	Trigger	Percentage Rate	Target
... the method
Visibility	¯	¯	¯
Detail Screen	Cons Unit Partner Unit Item		Item

Note Note

The target also requires the characteristic consolidation unit . But you don’t need to specify this characteristic again for the target because it is inherited from the trigger.

End of the note.

Define method

Create a method with the following properties:

Trigger:

Type of trigger data:

Transaction data

Cumulative

Key figure: Total in group currency

Trigger data:

Characteristics		Trigger
Consolidation unit	=	A
Partner Unit	=	B
Item	=	Dividend Income

Percentage Rate:

Type of percentage rate data:

Master data

Attribute: Tax rate for distributed (paid out) earnings (40% in this case)

Target:

Characteristics		Target
Consolidation Unit	inherited from trigger	A
Item	=	Tax Expense

Assign document type and method

Assign the document type and method to the reclassification task.

B. Execute Task

Execute the reclassification task in the consolidation monitor.

The system posts as follows:

Consolidation Unit	Item	Partner Unit	Value
A	Dividend Income	B	32
A	Tax Expense	B	32-

Result

Tax income is now reclassified. You can now perform the elimination of investment income.