1. User's Guide
  2. National Tax Process
  3. Temporary Differences

Temporary Differences

The Temporary Differences form is used to enter the temporary differences that are not automated in the system. Amounts include temporary differences, tax losses, tax credits, federal or state credits, and the related valuation allowances. You can also enter activity such as current year and prior year adjustments and nonprovision/equity items.

Each temporary difference may be set up as either Current or Noncurrent for Balance Sheet classification purposes. To view these classifications, open the Temporary Differences Properties report. Temporary differences, Tax Losses, and Valuation Allowance (for example, current, noncurrent and tax losses) adjustments are entered on a pretax basis. Tax credits and valuation allowance–tax credits are entered on a tax-effected basis. The following valuation allowance accounts are provided:

  • Current temporary differences

  • Noncurrent temporary differences

  • Tax Losses

  • Tax Credits

All valuation allowances should be negative values, except for current year or other adjustment amounts that are meant to reduce the valuation allowance.

The application meets the requirements of ASC740 so that the total valuation allowance is allocated between the Current and Noncurrent assets in proportion to the respective values of the Current and Noncurrent deferred tax assets. For example, if the total valuation allowance is $100,000 with gross Current deferred tax assets of $200,000 and gross Noncurrent deferred tax assets of $800,000 (Noncurrent temporary differences, Tax Losses, and credits), the valuation allowance is allocated $20,000 (20%) to Current, and $80,000 (80%) to Noncurrent.

The form contains the following members in the columns (across):

  • Opening—Opening Balance—The prior year end temporary differences. It is populated automatically.

  • PYAdj—Prior Year Adjustment (Restatement)—This column is used when the opening balance of a deferred tax asset/(liability) must be restated with no impact on the provision. This adjustment affects only the beginning balance of the deferred tax asset/(liability) and does not affect the deferred provision. The amounts are entered manually.

  • TempDiffOpeningAdjusted—Opening Balance As Adjusted—The beginning-of-year balance after adjustments and is calculated (Opening + PYAdj).

  • CYSys—Automated—The current year book-tax difference automated in the current provision. This amount automatically flows to the temporary difference rollforward. Amounts for this column are automated only and affect the deferred tax expense.

  • CySysReversal——Automated Reversal—The reversal of the current-year book-tax difference automated in the current provision. This amount is automated based on the setting of equity temporary differences at the account level. Amounts for this column affect the deferred tax expense.

  • CYSysTotalNoTR—Automated Total—The sum of CYSys and CYSysReversal.

  • CYAdj—Adjustment—The current-year book-tax difference input in the current provision. This amount automatically flows to the temporary difference rollforward. Amounts for this column are manually input and impact the deferred tax expense.

  • CYAdjReversal—Adjustment Reversal—The reversal of the current year book-tax difference manually input in the current provision. This amount is automated based on the setting of equity temporary differences at the account level. Amounts for this column affect deferred tax expense.

  • CYAdjTotalNoTR—Adjustment Total—The sum of CYAdj and CYAdjReversal.

  • CYNoTR—Total—The sum of CYSysTotal and CYAdjTotal.

  • RTADO—Return to Accrual—The adjustments to temporary differences based on the Return to Accrual form. This amount is automated from the Return to Accrual form and affects deferred tax expense.

  • AuditDO—Audit Settlements—The adjustment to temporary differences resulting from audit settlements. This amount is manually entered to the temporary difference rollforward and affects deferred tax expense.

  • OtherSys—Other Adjustments—Automated—The automated adjustment to temporary differences from any other type of adjustment. This amount can be automated from supplemental schedules in Tax Provision.

  • OtherDO—Other Adjustments—The adjustment to temporary differences resulting from any other type of adjustment. This amount is manually entered to the temporary difference rollforward and affects deferred tax expense.

  • OtherTotal—Other Adjustments Total—This is the sum of OtherSys and OtherDO.

  • TransfersDO—Transfers—The adjustment to temporary differences resulting from transfers of assets/liabilities and the related temporary differences. This amount is manually entered to the temporary difference rollforward and affects deferred tax expense.

  • PYAAdjDO—Prior Year Adjustments—The adjustment to temporary differences resulting from prior year adjustments. This amount is manually entered to the temporary difference rollforward and affects deferred tax expense.

  • ContingencyDO—Contingency—The adjustment to temporary differences resulting from tax contingencies related to temporary differences. This amount is manually entered to the temporary difference rollforward and affects deferred tax expense.

  • TempDiffCYTotal—P&L Total—The total of CY, RTADO, AuditDO, OtherDO, TransfersDO, PYAAdjDO, and ContingencyDO.

  • AcqNP—Acquisitions—The adjustment to temporary differences resulting from the acquisition of assets/liabilities and the related temporary differences. This amount is automatically transferred from the Acquisitions form. Amounts do not affect deferred tax expense.

  • DisposalsNP—Disposals—The adjustment to temporary differences resulting from the disposals of assets/liabilities and the related temporary differences. This amount is manually entered to the temporary difference rollforward and does not impact deferred tax expense.

  • EquitySysNP—Equity System—The adjustment to temporary differences resulting from equity transactions. This amount is automated based on equity temporary difference settings at the account level and does not affect the deferred tax expense.

  • EquityAdjNP—Equity Adjustment—The adjustment to temporary differences resulting from equity transactions. This amount is manually entered to the temporary difference rollforward and does not affect the deferred tax expense.

  • EquityNPNTR—Total Equity—EquitySysNP—The total of EquitySysNP and EquityAdjNP.

  • EquityRTANP—Equity Prior Year—The adjustment to temporary differences resulting from equity transactions and return filing. This amount is automated based on equity temporary difference settings at the account level and does not affect the deferred tax expense.

  • EquityOtherNP—Equity Other—The adjustment to temporary differences resulting from all other equity transactions. This amount is manually input and does not affect the deferred tax expense.

  • TempDiffEquityNPTotal—Equity Total—The sum of EquityNP, EquityRTA, and EquityOtherNP.

  • TempDiffNPTotal—Non P&L Total—The sum of AcqNP, DisposalsNP, and EquityNPTotal.

  • TempDiffClosing—Closing Balance—The sum of OpenAdjusted, TempDiffCYTotal, and TempDiffNPTotal.

The form contains the following members in the rows (down):

  • TempGSTotal—Total Temporary Differences (GAAP to Stat)—The parent of base accounts that are user-defined upon implementation.

  • TempSTTotal—Total Temporary Differences (STAT to Tax)—The parent of base accounts that are user-defined upon implementation.

  • EquityTempTotal—Total Equity Temporary Differences—The parent of base accounts that are equity in nature and are user-defined upon implementation

  • TaxLossesTotal—Total Tax Losses—The parent of system-provided base accounts that are used for Tax Losses that are deferred. These are system-defined, and two accounts are provided: Current Year and Carryforward. Carryforward is linked to the Tax Losses form. See Tax Losses.

  • TaxCreditTotal—Total Tax Credits—The parent of system-provided base accounts that are used for Tax Credits that are deferred.

  • TaxAttribTotal—Total Tax Attributes—The parent of base accounts that are user-defined upon implementation. Amounts are usually entered on a tax-effected basis in the temporary difference rollforward and may be considered adjustments to deferred tax.

  • VATotal—Total Valuation Allowance—The parent of base accounts that are used to record valuation allowances against assets as required. Four accounts are provided: Current, Noncurrent, Credits, and TaxLoss. Credits are entered on a tax-effected basis, while amounts entered in the other accounts are entered on a pretax basis.