Deferred tax-reg.

Accounting Entries 429 views 1 replies

Hi Friends,

 

I want to get cleared with regard to creation of provision for deferred tax liability/asset when there is a loss..

Do we need to create Deferred Tax Provision even when a company suffers loss??

Pl let me know asap..

Replies (1)

Hi,

In your case Deferred Tax Asset will be created because of Loss. Creating DTA depends on the "virtual certainity supported by convincing evidence" that sufficient future taxable income will be available against which such deferred tax asset can be realised.

In normal practice many companies does not created DTA because of lack of certainity of future taxable income, however many times it depends on Company to Company basis also.

As per AS - 22 Convincing Evidence means:

To be convincing, the evidence should be available at the reporting date in a concrete form, for example, a profitable binding export order, cancellation of which will result in payment
of heavy damages by the defaulting party. On the other hand, a projection of the future profits made by an enterprise based on the future capital expenditures or future restructuring etc. submitted even to an outside agency, e.g., to a credit agency for obtaining loans and accepted by that agency cannot, in isolation, be considered as convincing evidence.

As per AS - 22 Virtual Certaininty Means:

Virtual certainty refers to the extent of certainty, which,for all practical purposes, can be considered certain. Virtual certainty cannot be based merely on forecasts of performance such as business plans. Virtual certainty is not a matter of perception and is to be supported by convincing evidence. Evidence is a matter of fact.

So broadly check these two conditions and create DTA, but mostly companies avoid to create it because of lack of evidence and certainity.


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
19 May 2026
Accountant

ca kunjan

Mumbai

CA Inter

View Details
Company
Featured 26 May 2026
Account Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
10 June 2026
Senior Account Executive

JDS Advisory LLP

Ahmedabad

CA Inter

View Details
Company
04 June 2026
Semi Qualified CA

Goyal Puneet & Associates

New Delhi

CA Final

View Details
Company
26 May 2026
CA / MBA (Finance) / CMA / M.Com (Finance)

Sri Aurobindo Gnostic Centre of Education

New Delhi

CA

View Details
Company
Featured 27 May 2026
Lead Conversion Executive / Sales Closing Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
ARTICLESHIP 31 May 2026
Article Assistant

KPRS And Associates

New Delhi

CA Inter

View Details
Company
Featured 15 June 2026
Senior Auditor

N. Dhawan & Co

New Delhi

CA Inter

View Details