Calculating Recast using Deferred Tax Closing Rate

You now have the ability to use closing deferred tax rate (that is, TRCS_TaxRateNoncurrentClosing) for the covered tax recast calculations. To enable Recast amount using closing deferred tax rate (that is, TRCS_TaxRateNoncurrentClosing ) option, go to the Tax Settings page.

Select the checkbox Recast amount using closing deferred tax rate and click Save.

The subsequent consolidations then use the closing rate to calculate recast amount. By default, recast is calculated using Current Year Tax Rate.

Example Usecase - Calculating Recast:

Table 32-1 Calculating Recast

Pillar Two Rate	Current Year Rate	Closing Rate
15%	21%	25%

• Enter Covered Tax Adjustment : 120,000
• Pre Tax amount = Covered tax adjustment/closing rate (that is, 120,000 / 25% =480,000)
• Pillar Two minimum tax = Pre Tax from above * Pillar Two Rate (480,000 * 15% =72,000)
• Recast = difference between Pillar Two min tax - Pre Tax that is, 72,000 – 120,000 = -48,000

  Topup Tax form showing Recast Amount

  

  Note:

  • Post saving the setting, run impact entities with data rule to force impact the entities - if required.
  • When calculating recast for temporary difference account if the account has pre-tax value, then system uses the available pre-tax value instead of deriving the pre-tax amount.