Will the change from simple interest to compound interest affect my previous deferred taxes?
No. We won't change how we calculate interest on any deferred taxes we paid through this year.
However, from November forward, we'll calculate interest on new deferred taxes as compound interest.
What's the difference between simple interest and compound interest?
Simple interest is calculated annually on only
the original principal amount.
Compound interest is calculated annually on the original principal amount and
the interest that's accrued in all previous years.
In the example below, at the end of five years, the difference between simple and compound interest on $1,000 is $38.23.
Simple vs compound interest