If there is an opening balance of Deferred Tax Asset say Rs.130000, and for the current year Deferred Tax Liability to be provided is Rs. 290000/- Can the DTL be set off against the op bal of DTA to give net DTL of 160000, OR SHOULD YOU debit 420000 to P&L and credit 130000 & 290000 to DTA and DTL respectively???? Does this difference in treatment make much difference?
AS 22 - Accounting for Taxes on Income
Presentation and Disclosure –
The DTA and DTL can be set off if they are under the same governing laws and the right to set off is enforceable. Accordingly the tax liability of US subsidiary can not be set off against the Tax assets of Indian holding company since they are not under the same governing laws.
DTA and DTL are required to be shown differently from the current assets and current liabilities. The major components of DTA and DTL should be disclosed.
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