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AS - 22 Urgent Query

DMC (Student) (364 Points)

09 December 2009

There is loss as per both books of accounts and income tax so is it necessary to provide for DTA or DTL? The company was incorporated 3 years back and has loss both as per books of accounts and income tax for all the 3 financial years.

However the loss as per IT is greater than loss as per books of account for all the 3 years.

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3 Replies

MAGESH.G (STUDENT) (195 Points)
Replied 17 December 2009

Paragraph 17 of AS 22 requires that “Where an enterprise has
unabsorbed depreciation or carry forward of losses under tax
laws, deferred tax assets should be recognised only to the extent that
there is virtual certainty supported by convincing evidence that
sufficient future taxable income will be available against which such
deferred tax assets can be realised”. Please download the following file

https://www.icai.org/resource_file/321asi_accstand9.pdf

MAGESH.G (STUDENT) (195 Points)
Replied 17 December 2009

Refer to this one www.icai.org/resource_file/10502jan05p875-878.pdf

CA Pradeep Jain (Job - Finance Department) (69 Points)
Replied 19 December 2009

If you have losses as per both books then questin of DTL doesn't arise at all. For DTA , you should create the same only if you have virtual certainty that you will make profits in coming year & your current losseswill be abosrbed.