Deferred Tax Asset and Liability

You will calculate the Net worth  by applying following formula:-

1) NW = Eqity +preference +Debenture + R& S- Misc exp, or

2) NW = Fixed assets + current assets - Outside liabilty

So, you mean DTA/DTL are not consideredwhile valuation of net worth..Is it so?

Deffered tax asset and deffered tax liability, these are the accounts opened due to difference in the calculations between income tax act and companies act. these are not to be considered for calculation of net worth.

plz correct me if i m wrong

still am confused..

see my reason of including deferred tax liability in the reserves and surpluses is:  D.T.L. arises when taxable profit<book profit.  It implies we make an excess provision of taxes thn what is required under ther IT Act (coz we make provision of taxes on the basis of accounting profit). Since provison for taxes is an appropriation of profit so it reduces the actual profit. As a result reserves and surpluses decreases. But such D.T.L. is not required to be paid in future coz it is capable of reversal. So to compensate I add back D.T.L.  in the reserves and surpluses. And though it is capable of reversal in the future, but we calculate Net Worth of a business at a point of time. So, to show its effect I added it back.

But I want to knw whether its a correct approach or not? suggest me the correct method....

As per AS-22,Deferred Tax liability is NOT considered while calculating Net Worth, it will shown in Balance Sheet under a separate head "Deferred Tax Liablity " below Loan & Borrowings & above Current Liabilities & Provisions...

Agreed...bt wat abt da arguments whcih I have given above?

Agreed...bt wat abt da arguments whcih I have given above?

DTL and DTA shall not consider for the purpose of calculating NW by capital method but u may consider while calculating NW by asset method.

as follows

NW = FIxed Assets + CUrrent Assets(including DTA)- Outside liability (including DTL)

NW= Equity +Preference + Deb+R&S - Misc.