Example Use Case

In the example below, you have set up (Stock Compensation) as Equity Reversal Target Account.

Example Use Case - Stock Compensation

The equity reversal type is set for both National and Regional, so this Temp account is valid for both.

Temp Account - National and Regional

Note that, Stock Compensation is a temporary account.

  • For Actual FY16 P12 you have the following values:
    • Net Income Before Tax (NIBT), Adjustment column shows: 10,000
    • Stock Compensation: 5000
  • For Actual FY16 P13 (RTA) you have the following values:
    • Net Income Before Tax (NIBT), RTA Adjustment: 50,000
    • Net Income Before Tax (NIBT), RTA Differences (RTA(P13) – P12): 40,000

Net Income Before Tax

During Current Tax Expense calculation the Stock Compensation (value: 5000) is also included (that is, 40000-5000=35000).

Stock Compensation Value

Note the following values in the screenshot below:

  • Taxable Income, RTA Differences= RTA (P13) – P12: 40000-5000=35000
  • Current Tax on Taxable Income, RTA Differences: 35000*20 (Current Year Tax Rate)/100=7000

Taxable Income and Current Tax on Taxable Income

Now, in order to account for that you need to make a manual adjustment of 1000 (5000*20/100) as shown in the screenshot below.

Manual Adjustments

Note that once you have enabled RTA Bifurcate, you do not need to make any adjustment since the values are pulled automatically.

Automatic Adjustments