Deferred tax assets & liabilities

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Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2012 Hi

Can anyone explain the concept of Deferred tax assets & liabilities.?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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13 July 2012 Dear Author,
Please read AS 22 first then ask for specific query/problem in this regard.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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13 July 2012 Deferred tax is the tax effect of timing differences that arises between taxable income and accounting income for a period that originate in one period and are
capable of reversal in one or more subsequent periods.
Accounting income (loss) is the net profit or loss for a period, as reported in the statement of profit and loss, before deducting income tax expense or adding income tax saving.
Taxable income (tax loss) is the amount of the income (loss) for a period,
determined in accordance with the tax laws, based upon which income tax payable (recoverable) is determined.

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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13 July 2012 Pl see the points given below.

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 from current assets and current liabilities 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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