Deferred tax - methodology-interim reporting & income tax

22 July 2019
Dear All,

The query is related to Deferred Tax Calculation.

INCOME TAX (IT) : For IT Purpose Deferred Tax (Say for Ex: Depreciation on assets) is calculated on YEARLY BASIS.

INTERIM REPORTING : For preparation of Financials for Quarterly Reporting purpose the deferred tax asset is calculated on DAYS BASIS (for Ex: Depreciation on Assets is calculated on Days Basis for a particular quarter)

ANNUAL REPORTING : The depreciation on assets for a year (for Financial Reporting (YEAR)) is computed by adding the 4 quarters depreciation calculated for each quarter.

Because of the difference in the number of days for Interim Reporting & IT Purpose there occurs a huge difference between the depreciation on assets which leads to difference in Deferred Tax Asset/Liability (If we calculate Deferred Tax Asset/Liability for Interim Reporting & Tax Purpose on same basis (say on Yearly) then the correct Deferred Tax Asset/Liability is computed but in the given case because of the change in the methodology (i.e., Taking DAYS for computing for Interim Reporting Purpose and on YEARLY Basis for computing for IT Purpose) there occurs huge difference in Deferred Tax Asset calculation).

Please suggest which methodology should be followed for computing Deferred Tax Asset/Liability for Interim Reporting & Final (Yearly) Reporting purpose.

If possible please provide supporting attachment.


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