Temporary difference workpaper

Introduction

The temporary difference workpaper facilitates the creation of temporary differences that automatically reverse in the subsequent period. It can be used for:

• General provisions and accruals
• Doubtful debt provisions
• 63-day adjustments for employment income provisions
• Prepayments
• Foreign exchange (FX)
• Employee share scheme
• Deferred income and expenditure
• Income equalisation schemes

Temporary difference workpapers can be integrated into accounts directly from the trial balance or other account sources. Alternatively, they can be established as standalone not in accounts workpapers from the Workpapers screen.

In addition to its default features, an advanced view is available, empowering users to navigate complex scenarios concerning balance sheet deferred tax on temporary adjustments that are excluded from the tax return.

Adding the workpaper

Important

Ensure temporary differences are sourced from the balance sheet or not in accounts wherever feasible. While additions can be made from the profit and loss, it is not recommended without a full understanding of the carrying amount position over time as tax return and deferred tax positions reverse in subsequent periods.

From your accounts

1. Navigate to Workpapers > Accounts > Trial balance (or the relevant source)
2. Identify the account for which you wish to add the workpaper.
3. Choose Temporary Difference from the Add workpaper drop-down list.

From not in accounts

1. Navigate to Workpapers > Workpapers.
2. Click on the New Workpaper button to create a not in accounts temporary difference.

Preparing the workpaper

General adjustments

1. Click the hyperlink to access the workpaper.
2. Make necessary adjustments, considering future taxable or deductible amounts.

63 day adjustments

To prepare 63-day adjustments, follow the same procedure as for general temporary difference adjustments:

1. Click the hyperlink to open the workpaper.
2. Include the future deductible amount net of the 63-day amount deductible in the current year, utilising either a formula or manual input.

Advanced adjustments

This optional format enables users to determine if the tax adjustment should affect only the Balance Sheet or both the Balance Sheet and the Income Statement, facilitating management of adjustments impacting deferred tax but not the tax return:

1. Click on the Advanced view.
2. Prepare adjustments, dividing future taxable or deductible amounts into Balance Sheet or Income Statement categories.
3. Amounts entered in the Balance Sheet movement section automatically flow through to the BS charge column on the Deferred Tax Proof > Prior Period screen.