Step-by-step computation for Macro-step 1

Purpose

The purpose of the Scope and Perimeter analysis is to construct the GloBE perimeter by identifiying all the Constituent Entities and fixing their legal characteristic, thus allowing further treatment. It also allows to define the different sub-groups and sub-perimeters (JVs, MOMNEs, Investment entities...) in each jurisdiction that will be the basis of the next computational steps.

General Logic

In order to perform the Perimeter analysis a serie of computations on the shareholding graph needs to be perform. This will allow to finalize the direct and indirect ownership interests as well as the controlling interest necessary to draw the limits of the different sub-perimeters. Moreover a series of graph transversal will be necessary to qualify certain entities as member of Joint Ventures, Excluded Entities and or Investment entities.

Data Input

The Data input for Macro-step 1 consists in :

• The list of all potential entities and their characteristics;
• The list of all direct shareholdings and their characteristics or the ownership and controlling interest links

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Data Output

The Data output for Macro-step 1 consists in :

• The final characterization of each Constituent Entity and out of group entity with regard to GloBE rules, ready for input in the GIR;
• The final ownership and controlling interest matrices for use in Macro-step 3.'s re-allocations and various elections, as well as the Charging Mechanisms of Macro-step 5
• The final list of JVs and Minority-Owned sub-groups in each Jurisdictions as well as groups of Investment entities

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Detailed Step by step approach

Step 1.1. - Sanity checks on Ownership and Controlling interests

Purpose

The purpose of the Santity checks is identify and report all the data structure issues in the shareholding structure of the group, before computing the indirect ownership interests. It serves as an important reminder that the group's perimeter is at the basis of the Pillar 2 computation and that no accurate result can be achieved without ensuring its quality.

General Logic

This Step 1.1. will consist in a sequence of computations, checks and controls aiming at ensuring that depending on the level of input, the data provided is coherent and usable.

Data Input

The Data input for Step 1.1. consists in :

• The list of Entities for which legal characteristics are provided (within or outside the future GloBE Perimeter);
• The list of pre-calculated shareholding interests both ownership and controlling interests if links are available for each shareholding relationships as percentages;
• The list of shares, characteristics of these shares with regards to financial and control rights, for each Entity in the perimeter as well as outside;
• The list of Fall-back elections for the MNE group : assumptions for undocumented shares, ownership or controlling interests (re-normalization; auto-filling with either UPE or generic out-of-group entity or UPE)

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Data Output

The Data output for Step 1.1. consists in :

• The list of subsidiary entities absent from the list of Entities for which legal characteristics have been defined;
• The list of parent entities absent from the list of Entities for which legal characteristics have been defined;
• The list entities with Legal characteristics completely absent from the shareholding structure;
• The list of subsidiaries with incoherent shareholding structures : incoherent single values (negative, not numerical; higher than 100 for percentages...); incoherent aggregates values (totals not equal to 100%; computational errors...)
• The list of auto-cleaned elements of the structure using the fall-back mechanisms
• The list of errors for each faulty elements

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Detailed computations

The list of Micro-Step is a follows :

• Micro-Step 1.1.1. Unknown subsidiaries
• Micro-Step 1.1.2. Unknown parents
• Micro-Step 1.1.3. Entity absent from the shareholding structure
• Micro-Step 1.1.4. Typing and constraints controls
• Micro-Step 1.1.5. Shareholding coherence controls

Micro-Step 1.1.1. Unknown subsidiaries

This step is pretty simple as it basically corresponds to a VLOOKUP between the matrix of shareholdings and the list of entities with characteristics to verify that any entity present as the target of a shareholding relationship from at least one parent entity is also present in the list of legal entities.

Micro-Step 1.1.2. Unknown parents

This step is pretty simple as it basically corresponds to a VLOOKUP between the matrix of shareholdings and the list of entities with characteristics to verify that any parent entity present as the owner of a shareholding relationship to any subsidiary entity is also present in the list of legal entities.

Micro-Step 1.1.3. Entity absent from the shareholding structure

This step is pretty simple as it basically corresponds to 2 VLOOKUPs between the matrix of shareholdings and the list of entities with characteristics to verify that any entity present in the list of entities is also present as the owner or the target of at least one shareholding link.

Micro-Step 1.1.4. Typing and constraints controls

This step is pretty simple as it basically corresponds to a verification of the different values according to their definition, typing and constraints.

The current list of these controls are as :

• percentages need to be doubles between 0 and 1;
• integers and doubles need to be positive or null;

Micro-Step 1.1.5. Shareholding coherence controls

This step requires to add the shareholding relationships to verify that the aggregates add-up to the given totals or percentages for each subsidiary entity and apply the fall-back mechanisms.

The current list of these controls and corrections are as follows :

• In any case, an error is returned containing the type of error and the correction made
• do the sum of percentages for both ownership and/or controlling interest sum to 100%, for each subsidiary entity;
  • If the fall-back election has been taken, the percentages are corrected accordingly according to the choice made :
    • re-normalization (for total values positive and lower or higher than 1): values are put back to 100%, by dividing to the total percentage reached;
    • automated allocation of the missing shareholding interests (for total values positive and lower than 1) to either :
      • a generic independent third party owner;
      • the UPE;
• do the sum of each Share type for the subsidiary entity add to the provided total (if not provided at all, this test is skipped);
  • If the fall-back election has been taken, the percentages are corrected accordingly according to the choice made :
    • re-normalization (for a total different from the total provided): the new total is considered as true;
    • automated allocation of the missing hares (for totals lower than the total provided) to either :
      • a generic independent third party owner;
      • the UPE;

Step 1.2. - Generation of the Ownership Interests and Control matrices

Purpose

The purpose of this step is to build the necessary input for the various computations that will follow and may require matrix computations.

General Logic

This Step 1.2. will consist in the application of a few transformation of the data cleaned or checked at the Step 1.1. and form the initial ownership interest matrix and the controlling interest matrix if the data is available.

Data Input

The Data input for Step 1.2. consists in :

• The same input as the Step 1.1.
• The output of the Step 1.1.

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Data Output

The Data output for Step 1.2. consists in :

• The direct ownership interest matrix;
• The direct controlling interest matrix;

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Detailed computations

The list of Micro-Step is a follows :

• Micro-Step 1.2.1.

Micro-Step 1.2.1. Initial construction of the matrices

This step applies to both ownership and controlling interests matrices.

It consists in the construction of the Adjacency Matrix of the Shareholding Graph.

Micro-Step 1.2.2. Unknown parents

This .

Micro-Step 1.2.3. Entity absent from the shareholding structure

This .

Step 1.5. - Definition of the MNE Group

Case 1 : Using Controlling interests and consolidation method

UPE identification : entity with

• consolidation "full"
• no parent entity with
  • controlling interest in it
  • and consolidation method
    • full/proportional/equity
    • or not consolidated for reasons in article 1.2.2.b) "size or materiality grounds"/, or "is held for sale"

Entity is part of the MNE Group if :

• UPE has Controlling interest in the entity
• and consolidation method
  • full/proportional/equity
  • or not consolidated for reasons in article 1.2.2.b) "size or materiality grounds"/, or "is held for sale"

Step 1.9. - Specific CE treatments

Investment entity identification

Purpose

The purpose of the .

General Logic

This Step 1.2. will consist in .

Data Input

The Data input for Step 1.2. consists in :

• The list of

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Data Output

The Data output for Step 1.2. consists in :

• The list of

The detailed matrix is available in the relevant section of the Pillar 2 Data Structure.

Detailed computations

The list of Micro-Step is a follows :

• Micro-Step 1.2.1.

Micro-Step 1.2.1. Unknown subsidiaries

This step .

Micro-Step 1.2.2. Unknown parents

This .

Micro-Step 1.2.3. Entity absent from the shareholding structure

This .