AS - 22

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Subrahmanyam

Subrahmanyam (Querist)
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25 November 2009 What is the use of AS 22...as i believe its only a theoritical presentation for deferred taxes...

Sreedhar Atchutuni ACA,GradCWA

Sreedhar Atchutuni ACA,GradCWA (Expert)
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25 November 2009 Refer objective statement of AS 22.

It is not a theoretical presentation for deferred taxes.

For example:

A ltd in the first year of its operation earned a profit of Rs. 100. Companies Dep. Rs.10 IT Dep. Rs.100.

PBT 100
Less: Current Taxes 0
Less: DTL 27.81
--------
PAT 72.19
--------
If DTL has not been provided management have taken decisions (Future decisions like Capital Budgeting, Dividend Decisions etc.)on the basis that profit is Rs.100.Since DTL has been provided which means certain funds have to retained for future tax liability and available funds are only Rs.72.19 and accordingly correct decisions are taken.

Taxes of income is based on matching concept.

shakuntala chhangani

shakuntala chhangani (Expert)
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28 November 2009 Hi Subrahmanyam, we know there are three fundamental accounting assumption i.e. accrual, going concern and consistency. but when we make provision for taxation as per liability to pay, where do we follow accrual basis. hence under AS 22 we make the provision for tax liability which has already accrued irrespective of whether it has been paid or not. If our tax payable is more than the liability accrued, it is prepayment and shown as DTA, if IT liability is less than the accrued one then it is outstanding and shown as DTL. it is all practical and is one of the imp topic of CA Finals. Regards, CA Shakuntala Chhangani

Subrahmanyam

Subrahmanyam (Querist)
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29 November 2009 I think Future taxability is dependant on future income & it is not affected by creation of DTL in prev yr. I think DTA will be created in the coming years as the Profit as per IT will be more than Comp Act(probably which could be set-off with the DTL).

Is it possible for you to explain with an eg taking it for say 2-3 years for me to understand it better...

shakuntala chhangani

shakuntala chhangani (Expert)
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30 November 2009 Hey Subramanyam, don,t comment on answers. accept what you like. these are our individual interpretations. you can revert back in case you need any further explanation. Regards

Subrahmanyam

Subrahmanyam (Querist)
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30 November 2009 Oops...do not intend to say anything otherwise...tried to modify it accordingly(do let me know in case if it still needs any further tweaking)..thnx for the feedback..

shakuntala chhangani

shakuntala chhangani (Expert)
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30 November 2009 Nothing personal as you have appreciated my answer anyway. but our words should not discourage others. that is what is taught in professional courses. No???

Subrahmanyam

Subrahmanyam (Querist)
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30 November 2009 YES, Completely agree with You...

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