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Effective tax rate materiality report

FASB released
ASU 2023-09
, which requires
US GAAP
 filers to disclose a more transparent and uniform
Rate Reconciliation (ETR)
 in their published financial statements for annual periods beginning after December 15, 2024.
This guide explains the options and setup you need to create the report. The
Effective Tax Rate CSC Breakout
 report with
Stacked CSC Details
 view gives you an ETR that meets the new guidelines.

Set up

Jurisdictional Sub-consolidation
In
Administration
, create a
Top-Tier Parent
 with
Sub-Tier jurisdictional sub-consolidations
 representing the various countries required to be disclosed.
After creating the
Jurisdictional Sub-consolidation
, select your domicile country by marking the box in the
Actions
 column. You can only select 1 domicile country.

Dataset Materiality Parameters

  • For your selected
    Dataset
    , add the materiality parameters under
    More | Dataset Parameters
    .
  • The parameters are
    ETRMATERIALPERCENT
     (Decimal Numeric) and
    ETRMATERIALCURRENCY
     (Whole Numbers).
  • Select one of these parameters under report options when you run the report.

Create ETR Materiality Rollup Set

Create an
ETR Materiality Rollup Set
. The
ETR Materiality Rollup Set
 type is option 4 when creating a
Rollup Set
.

Create Rollups

When you create your component rollups for the
ETR Materiality Rollup Set
, select a relevant
Standard Category
.
You can assign multiple component rollups to a
Standard Category
. The
Standard Categories
 align with
ASU 2023-09
 and are displayed on the report.
note
You don't need to create rollups for system categories, since these always appear on the report. System categories are subject to materiality
The system categories are:
  • FX Adjustment
  • State and Local Income Taxes
  • Effect of Rates Different than Statutory
  • Effect of Rate Changes in Current Year
  • True-ups

Time Saver Hint

After you create your
ETR Materiality Rollup Set
 and 1 rollup with a
Standard Category
 assigned, use the
#CRU# Component Rollup Sets
 tab in the
Categories export file
 to create your remaining rollups and assign your components to each rollup. The
#CRU#
 tab has a column at the end to assign
Standard Categories
 to each rollup.
The codes for the Standard Categories are:
  • ECB (Effect of Cross Border Tax Laws)
  • TC (Tax Credits)
  • VA (Valuation Allowances)
  • NNI (Nontaxable or Nondeductible Items)
  • UTB (Changes in Unrecognized Tax Benefits)
  • ORI (Other Reconciling Items)
After making changes, save the file and import it back into the system using the
Categories Import
 option in
Administration
.

Enable the report

This report is only available when
Administration
System
Manage Configurations
Reporting
Effective Tax Rate "Add CSC Breakout Report"
 option is set to
Yes
.

Run the report

  1. Select the
    Dataset
     that has the materiality parameters added.
  2. Set the
    Report Level
     to the jurisdictional CSC you created.
  3. Select the
    Effective Tax Rate CSC Breakout report
     from the
    Report
     dropdown.
  4. Select the
    ETR Materiality Rollup Set
     you created.
  5. Select
    Stacked CSC
     in the
    Details
     dropdown.
  6. Select 1 of the materiality thresholds you created for the
    Dataset
    .
  7. Run the report.

Stacked CSC with materiality report

The domicile jurisdiction appears first and needs to show all System and Standard Categories, per ASU 2023-09, regardless of materiality.
note
Non-domicile jurisdictions only display
System and Material Standard Categories
.
If a non-domicile jurisdiction has no material
System and Standard Categories
 but the total of the
System and Standard Categories
 is material, the jurisdiction is listed with a total.
If a non-domicile jurisdiction doesn't have any individual or aggregate material totals, the system groups its totals under
Other Jurisdictions
.
The changes in
Unrecognized Tax Benefits
 category is summed across all jurisdictions and shown as a separate row.

Apply Materiality to the report

When running the report, the system applies the selected materiality threshold of the Dataset to each component rollup.
  • If the selected materiality threshold is 5% (ETRMATERIALPERCENT) and the Group Rate is 21%, then the threshold applied to each rollup is 1.05% of PTBI of the CSC group: ((5% x 21% = 1.05%+/-) or greater x PTBI of the CSC).
  • If the selected materiality threshold is $10,000 (ETRMATERIALCURRENCY), then the federal tax effected rollup must be $10,000 or greater.

Items that aren't Material

On the Stacked CSC report, if a rollup within an otherwise material
Standard
 Category is less than the selected
ETRMATERIALPERCENT
 or
ETRMATERIALCURRENCY
, then the rollup will be included in the
Other
 row within the
Standard
 Category.
If the total of the rollups assigned to a Standard Category is less than the selected
ETRMATERIALPERCENT
 or
ETRMATERIALCURRENCY
, then the
Standard
 Category won't be displayed as a separate line item and the associated rollups will appear under
Other Reconciling Items
 with the name of the
Standard
 category in parentheses.
This presentation provides full clarity as to what is included in
Other Reconciling Items
.

Rate Effect column

For the
Stacked CSC
 view, the Rate Effect column is calculated based on the total
PTBI
 of the
CSC
. This is different from the
Effective Tax Rate CSC Breakout
 report, which calculates the
Rate Effect
 based on the
PTBI
 of each
Sub-Consolidation
 separately.

This article applies to:

  • PRODUCT: ONESOURCE Tax Provision