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Data origin TRR columns
The 'TRR' dialogue consists of the following three (four) columns:
Column: | Local GAAP | Late Adjustments | Adjustment IFRS | IFRS |
Content |
| * Calculation of expected income tax expense based on tax balance result before taxes acc. to local GAAP (for late adjustments to current taxes) | * Calculation of expected income tax expense based on tax balance result before taxes (for IFRS result adjustment) |
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Display |
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Data Origin |
| * 'Current Taxes' dialogue (when using Toolbox, for foreign companies)
| Dialogue:
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Difference: Germany / other countries
Depending on whether it is a German company (German tax law) or a company from other country (toolbox), the selected rows are displayed or hidden. This will be explained in the next chapter. The dialogue TRR in the main area (Sub-)Group offers an overview of all TRR items.
TRR tooltips
TRR items displayed in the TRR dialogue have tooltips. Click on a green square to view the explanation to a TRR item. It displays the dialogue of origin, the relevant row and the tax base.
Click on the next-button to switch to the origin dialogue.
Validation: P/L and tax expense/profit and calculated tax expense/earnings
TRR is validated directly in the dialogue header and any potential differences are displayed here. It is checked, whether TRR items explain the difference between effective income tax expense (original + deferred taxes) and expected income tax expenses (EBT x company tax rate).
TRR item Other tax can amount to max. 5% of the expected income tax expenses. If this amount is exceeded, a yellow warning triangle with an exclamation mark appears and user has to add a comment. Otherwise, the status of the Deferred taxes milestone cannot be changed to data ok. The 5% rule is not fixed in the IAS 12; it has been taken from the earlier US GAAP regulation and is widely used.
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Allocation of tax balance sheet corrections in tax calculation
In the B/S Comparison dialogue there is a local GAAP / tax balance deviation as shown:
The proposed values for tax profit are displayed for tax calculation purposes (Current Taxes dialogue):
The TRR:
Balance sheet differences Local GAAP / Tax Balance do not correspond to local tax balance sheet corrections
In the B/S Comparison dialogue there is a Correction to local tax balance classified as temporary.
For purposes of tax calculation a proposed value is displayed for the tax profit differences (Current Taxes dialogue). The proposed value can be viewed in the Local GAAP – Tax Comparison report (/ main dialogue Reports / dialogue Tax Reports).
If the calculated tax balance sheet correction differs from the proposed value in the Current Taxes dialogue, this may arise from the non-considered in the GTC data in the previous year tax return (true-up). In this case another correction amount has to be entered for tax calculation:
The TRR validation fails, because the tax balance sheet correction differs from the proposed value: 
The reason for this is that the deferred taxes are calculated based on the balance sheet comparison. If the resulting proposed value is not accepted in the Current Taxes dialogue, the TRR validation fails.
Creation of a true-up effect in the Others dialogue solves the problem. The true-up effect is explained in a separate chapter and can be calculated in the GTC automatically.
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Balance sheet differences IFRS / Local GAAP do not correspond to IFRS / Local GAAP result difference
In the B/S Comparison dialogue there is a difference between IFRS and local GAAP. The difference is temporary.
e.g.: If the amount was 100,000 and the tax rate amounts to 20%, deferred taxes are 20,000. IFRS-EBT is 100,000 because of the balance sheet deviation. The validation is successful:
If a deviating IFRS-EBT is detected, the TRR multiplied by the amount of difference does not equal the tax rate. Effect on earnings is traceable in this simple case. In real life it is not always evident whether asset differences between local GAAP and IFRS (documented in the GTC) have the right impact on earnings. The report 'Transition P&L results local GAAP / IFRS' is helpful here. The report shows whether the adjustments of balance sheet differences correspond to result differences: