Apportionment definition

What is an Apportionment?

An apportionment is the separation of revenues, expenses, or profits, which are then assigned to different accounts, departments, or subsidiaries. The concept is used in particular for the assignment of profits to different geographic regions of a business, which impacts the taxable profits reported to different governments. This can result in the recognition of more taxable income in jurisdictions with low tax rates, and less taxable income in jurisdictions with high tax rates.

The apportionment concept also applies to insurance, where the loss experienced by an insured party is allocated among the various insurers who are providing coverage.

Example of Apportionment

The total income of a multi-state entity could be apportioned to its state-level subsidiaries based on their individual sales, headcount, asset base, or cash receipts.