Once the members of the qualifying multinational group have been identified, the next step is to calculate the adjusted profits of each entity1, as this forms the basis of the effective tax rate calculations. This is done by first determining the amount of underlying profits and then applying the various adjustments set out in the legislation. Particular adjustments to the underlying profits may also need to be made in the case of members that are permanent establishments, transparent entities, certain hybrid entities and investment entities. Elections for certain items to be calculated in an alternative way are also available as described below.
Underlying profits
Underlying profits of a group member are those profits used in the preparation of the consolidated financial statements for the ultimate parent2. The underlying profit can be calculated using an alternative accounting standard provided that:
- Ìý
•ÌýÌýÌýÌý it is not reasonably practicable to determine those profits using the same accounting standard as the ultimate parent
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•ÌýÌýÌýÌý it is an acceptable or authorised accounting standard, already being
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