Deferred Tax
This query is : Resolved
28 September 2009
A Company has deprn only as an item involving Deferred Tax. Since Income Tax Deprn will always be lower than Company Rate of Deprn.,it will always have Deferred Tax Asset.What will happen to this DTA?It jus keeps on accumulating,na?
28 September 2009
Its not necessary. In case of computers only, Income tax depreciation shall be higher as it is @ 60% in comparison of Companies Act Depr where it is @ 40%. So it will be decided case to case what is actual difference for creating DTA/DTL.
29 September 2009
Thanks for your reply. But furniture deprn rate is also more in Co.'s Act(18.1) compared to Inc Tax Deprn.(10%). In case we generate only DTA for all the years, what to do? Can we write it off?
05 October 2009
Para 26 of AS-22 reads as follows:-
26. The carrying amount of deferred tax assets should be reviewed at each balance sheet date. An enterprise should write-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be (see paragraphs 15 to 18), that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-down may be reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be (see paragraphs 15 to 18), that sufficient future taxable income will be available.
DTA is always subject to prudence depending on the future outlook.
26. The carrying amount of deferred tax assets should be reviewed at each balance sheet date. An enterprise should write-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be (see paragraphs 15 to 18), that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-down may be reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be (see paragraphs 15 to 18), that sufficient future taxable income will be available.
DTA is always subject to prudence depending on the future outlook.
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