As 22 accounting for income tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2015 Hello,
I want to understand the concept of accounting for income tax and what is DTA & DTL and why we create a Valuation allowance with example

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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25 November 2015
1.Source:- AS-22 deals with deferred tax.

2.Focus:- It is based on the matching concept.

3.Reason:- Accounting income and taxable income may differ on account of various reasons.

4.Measurement:- The difference as aforesaid is itemized and permanent differences are eliminated. The rest is called timing difference.

5.Timing difference:- Those differences which lead to either saving in tax or payment of tax in the current year in the manner that such saving or payment is nullified in later years.

6.Recognition:- Deferred tax should be recognized for all timing differences subject to consideration of prudence in respect of deferred tax assets.

7.Rates:- Deferred tax is to be recognized using the tax rates that have been enacted on the balance sheet date. If not enacted can be measured on the tax laws that have been substantially enacted as on the b/s date.

8. Positioning:- deferred tax asset / liability should be disclosed separately in non- current assets and non- current liabilities respectively in the b/s.

9.Disclosure:- In the notes on accounts compliance of AS 22 may be mentioned as well as the workings of the deferred tax may be given.

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