Deferred TAx Reserve(URGENT)

What are the disclusre and Presentation requirement of Deffered Tax Reserve?

URGENT!

Replies (2)

Deferred tax is an accounting concept (also known as future income taxes), meaning a future tax liability or asset, resulting from temporary differences or timing differences between the accounting value of assets and liabilities and their value for tax purposes.

 

For Example:

The basic principle of accounting for deferred tax under a temporary difference approach can be illustrated using a common example in which a company has fixed assets which qualify for tax depreciation.

The following example assumes that a company purchases an asset for $1,000 which is depreciated for accounting purposes on a straight-line basis of five years. The company claims tax depreciation of 25% per year on a declining balance basis. The applicable rate of corporate income tax is assumed to be 35%. And then subtract the net value.

 

  Purchase Year 1 Year 2 Year 3 Year 4
Accounting value $1000 $800 $600 $400 $200
Tax value $1,000 $750 $563 $422 $316
Taxable/(deductible) temporary difference $0 $50 $38 $(22) $(116)
Deferred tax liability/(asset) at 35% $0 $18 $13 $(8) $(41)

As the tax value, or tax base, is lower than the accounting value, or book value, in years 1 and 2, the company should recognise a deferred tax liability. This also reflects the fact that the company has claimed tax depreciation in excess of the expense for accounting depreciation recorded in its accounts, whereas in the future the company should claim less tax depreciation in total than accounting depreciation in its accounts.

In years 3 and 4, the tax value exceeds the accounting value, therefore the company should recognise a deferred tax asset (subject to it having sufficient forecast profits so that it is able to utilise future tax deductions). This reflects the fact that the company expects to be able to claim tax depreciation in the future in excess of accounting depreciation.

Hope u will understand the privision of DT

Hi

I m satisfied with Dharmendra.You can also consider the AS-22 for understanding.

bye

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
19 August 2026
PAID ARTCILE ASSISTANT

My Legal Tax Consultants Pvt. Ltd.

Noida

CA Inter

View Details
Company
ARTICLESHIP 25 August 2026
CA Article's

Saini Pati Shah & Co LLP

Mumbai

CA Inter

View Details
Company
12 August 2026
Deputy Manager - Finance

RoamPrime Technologies Private Limited

Bengaluru

CA

View Details
Company
24 August 2026
Semi-Qualified CA/CA Finalist - Tax, GST, Audit & Accounts

Bharat Shah & Associates

Mumbai

CA Inter

View Details
Company
ARTICLESHIP 17 August 2026
Article Assistant

K R Kiran Kumar & Associates

Bengaluru

CA Inter

View Details
Company
18 August 2026
CA Semi Qualifies

Goyanka and Associates

New Delhi

CA Inter

View Details
Company
06 August 2026
Sr accounts executive, Asst Manager

JAMNA AUTO INDUSTRIES LTD

Jamshedpur

CA Inter

View Details
Company
27 August 2026
ACCOUNTANT

CHARUPREETI & CO

Noida

Graduate (Any)

View Details