08 October 2011
The basic logic behind DTA/DTL is accrual basis of accounting. It is provided to create total provision for tax liability in tune with profit as per profit and loss account and not as per profit for tax purposes.
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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