What is deferred taxes in SAP EC-CS - Consolidation?

SAP Term: deferred taxes

• Component: EC-CS

• Component Name: Consolidation

• Description: The taxes used for aligning the tax expenses of the individual financial statements with the group's earnings. Because of the consolidation activities that take place, there can be a difference between the group's yearly earnings and the sum of the earnings in the individual financial statements to be consolidated. A prerequisite for tax adjustments or deferrals is the balancing of tax expenses that are too high or too low in future periods. That is, deferred taxes must pertain to temporally limited differences of earnings.

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• Key Concepts: 
  Deferred taxes are a type of liability that arises when the amount of taxes reported on a company’s financial statements differs from the amount of taxes actually paid. This difference is due to differences in the timing of when the taxes are reported and when they are actually paid. In SAP EC-CS Consolidation, deferred taxes are used to adjust the consolidated financial statements to reflect the actual tax liability of the group. 
  
  How to use it: 
  In SAP EC-CS Consolidation, deferred taxes are used to adjust the consolidated financial statements to reflect the actual tax liability of the group. This is done by calculating the difference between the tax rate used in the consolidated financial statements and the actual tax rate paid by the group. The difference is then applied to each entity’s income statement and balance sheet to adjust for any differences in tax rates. 
  
  Tips & Tricks: 
  When calculating deferred taxes in SAP EC-CS Consolidation, it is important to ensure that all entities within the group are using the same tax rate. This will ensure that all entities within the group are accurately reflected in the consolidated financial statements. 
  
  Related Information: 
  For more information on deferred taxes and how they are used in SAP EC-CS Consolidation, please refer to SAP’s documentation on Deferred Taxes in Consolidation.