AS 22

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Hi! When calculating deferred tax asset or liability should we consider the Depreciation for the year or WDV as on 31st march?

Because as i understand from AS 22 we shd consider the Dep. for the year.But in some cases in my audit the WDV is considered. Can anyone clarify?

Replies (2)

theoritically we have to consider dep. only

If you consider the depr. for the year, you will arrive at current year provision for deferred tax. i.e., the extent of deferred tax to be created for that particular year. Whereas, if you consider the WDV, you can arrive at the closing balance of the 'Deferred tax' A/c. To be clear, WDV reflects the correct balance considering the errors, if any, in the previous years. It doesn't mean that, taking the depr for the year will reveal incorrect amounts. Consideration of depr for the year will depict the correct figures, only if the previous calculations are also done correcly. You may try some illustrations given in any book.

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