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Foreign divisional consolidations

Set up a foreign divisional consolidation

The international entity type in the binder’s properties determines how a binder is treated during the current year in the international computes.

International Entity Type

When you create a foreign divisional consolidation, parent or subsidiary (using
New, then Entity
 or
Enterprise Control Panel, then Entity Import
), ONESOURCE Income Tax sets the international entity type to
Foreign Entity
 thereby treating the binder as a legal entity.
For tax years 2009 (and later), an additional international entity type,
Division of Foreign Entity
, is available in foreign income tax binders with an entity type of parent, subsidiary, and divisional consolidation. When you select
Division of Foreign Entity
, the binder will be treated as a foreign disregarded entity (division or branch) in the current year.

International Data Completion Level

When you create a foreign divisional consolidation binder, the International Data Completion Level indicator (also referred to as the "sourcing level") determines whether the system looks to the divisional consolidation's data entry screens or its member (division) binders during computes.
  • When the foreign divisional consolidation's International Data Completion Level is Division, the international calculations and comprehensive edits use the sourcing workpaper, interest apportionment and current year tax information in the member (division) binders. The consolidated amounts are reflected in the divisional consolidation binder's screens.
  • When the foreign divisional consolidation's International Data Completion Level is Divisional Consolidation, the international calculations and comprehensive edits use the sourcing workpaper, interest apportionment and current year tax information in the foreign divisional consolidation binder. Data in the member (division) binders is ignored.

Intercompany Data Entry and Processing Level

Beginning with tax year 2011 binders, we added a new indicator option,
Intercompany Data Entry and Processing Level
. This indicator is located in the
Binder Properties
 window on the
International
 tab of a foreign divisional consolidation. This indicator defaults to
Divisional Consolidation
 which instructs the system to look for intercompany transactions in the foreign divisional consolidation binder's payment and receipt screens. Look Through and Subpart F comprehensive edits and calculations are performed as in earlier tax years.
If you use the
Binder Copy
 command, the system copies the international entity type and data entry settings and rolls them to the subsequent year.
When the foreign divisional consolidation's
Intercompany Data Entry and Processing Level
 indicator is
Division
, look through calculations and comprehensive edits use the information you enter in the Intercompany Payment and Receipts screens of the divisional consolidation's member binders and ignore any transactions present within the divisional consolidation binder. Subpart F calculations and comprehensive edits refer to the
Dividend
 tab in the foreign division's Intercompany Receipts screen for purposes of reallocating dividend income, however, all other Subpart F calculations are performed at the legal entity (foreign divisional consolidation) level.
Unlike the sourcing workpaper, interest apportionment and current year tax information, which is consolidated from the division binders and presented in the divisional consolidation's data entry screens, the consolidated intercompany transactions you enter in the division binders are not displayed in the divisional consolidation's Intercompany Payments and Receipts screens.
The foreign divisional consolidation data entry options default to:
  • International Data Completion Level = Division
  • Intercompany Data Entry and Processing Level = Divisional Consolidation.

Best Practices

The 8865 and partner Schedule K-1s are completed in legal entity foreign partnership binders. When you attempt to change the international entity type from
Foreign Entity
 to
Division of Foreign Entity,
ONESOURCE Income Tax verifies that the foreign parent, subsidiary or divisional consolidation is not selected on the
Foreign Partnerships
 tab of the Binder Properties of any other entity.
The TAS error message identifies the partner binders with this foreign partnership selected as an
 8865 Schedule K-1 transfer source
for tax adjustments.
If the foreign parent, subsidiary, or divisional consolidation binder is in the Members list of any foreign divisional consolidation (the binder is currently being used as a division), you cannot change the international entity type from
Division of Foreign Entity
 to
Foreign Entity
until you remove it from the list. ONESOURCE Income Tax issues a message identifying each foreign divisional consolidation that you must update.
If the foreign divisional consolidation's
Intercompany Data Entry and Processing Level
 indicator is
Division
, then the
International Data Completion Level
 must also be
Division
.
If you subsequently change the
International Data Completion Level
to
Divisional Consolidation
, then the system deactivates the
Intercompany Data Entry and Processing Level
 indicator and automatically changes it to
Divisional
Consolidation
.
In addition, the system retains existing information in the intercompany payments and receipts screens of the foreign divisional consolidation's member binders but ignores it during the Look Through and Subpart F computes.

ONESOURCE Foreign Hybrid Divisions

A foreign division is considered a “hybrid” when the entity type indicates a legal entity (parent, subsidiary or divisional consolidation) but the binder’s international entity type is
Division of Foreign Entity
. Since the TAS navigation tree inside the binder is controlled by the entity type, screens that are only applicable to legal entities (such as Beginning Balances – E&P and Taxes and Other Adjustment screens) are included in a hybrid division. ONESOURCE Income Tax presents the following message if data entry is not expected:
Data entered on this screen will be DISREGARDED during international computes because this binder is a foreign disregarded entity.
The Columnar WTB can be used within a hybrid divisional consolidation binder to review the aggregation of amounts from its division (member) binders.

This article applies to:

  • Product: ONESOURCE Income Tax, ONESOURCE International Tax
  • Return type: 1120 Corporation
  • Subject: Consolidations

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