recognising deferred tax asset for the first time in account
This query is : Resolved
Jay Chakraborty
(Querist)
07 August 2009
a company in earlier has disclosed by way of a note its deferred tax asset figure, but this it is bringing that very figure into accounts only by adding the same with general reserve and with corresponding debit. is their treatment is right?
Abhishek Mohta
(Expert)
07 August 2009
Recognising Deffered Tax Asset is a very serious accounting step taken by the company.
Being the auditor of the company you should have sufficient material evidence that the Asset will be reversed during the next few years. If the same is not there then you should not allow them to recognise the Deferred Tax Asset.
The Deferred Tax Asset will be credited to the P&L A/c and correspondingly will be shown separately below Investments and above Current Assets in the Asset side of the Balance Sheet.
In the notes to Accounts the basis of its calcultaion should be disclosed.
Being the auditor of the company you should have sufficient material evidence that the Asset will be reversed during the next few years. If the same is not there then you should not allow them to recognise the Deferred Tax Asset.
The Deferred Tax Asset will be credited to the P&L A/c and correspondingly will be shown separately below Investments and above Current Assets in the Asset side of the Balance Sheet.
In the notes to Accounts the basis of its calcultaion should be disclosed.
07 August 2009
agree with Mr. Abhishek.
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