Re: Deferred Tax

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This query is : Resolved

Jay Rachh (Querist)

25 June 2016 Can someone provide me with a summarised explanation or Article on Deferred Tax provisions as per WDV approach ????? Please do enlighten me with the same at the earliest

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

25 June 2016 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.

Jay Rachh

Jay Rachh (Querist)

26 June 2016 Sir But I want to understand the wdv method of charging Deferred Tax which is somewhat different than Depreciation approach. Please explain