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Thread: Accounting Standard (AS) 22 Accounting forTaxes on Income

  1. #1
    Accounting Standards
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    Thumbs up Accounting Standard (AS) 22 Accounting forTaxes on Income

    Accounting Standard (AS) 22
    (issued 2001)
    Accounting forTaxes on Income
    (This Accounting Standard includes paragraphs set in
    bold italic type
    and plain type, which have equal authority. Paragraphs in bold italic
    type indicate the main principles. This Accounting Standard should be
    read in the context of its objective and the Preface to the Statements of
    Accounting Standards
    1.)

    Accounting Standard (AS) 22,
    ‘Accounting for Taxes on Income’, issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of accounting periods commencing on or after 1-4-2001. It is mandatory in nature2 for:
    (a) All the accounting periods commencing on or after 01.04.2001, in respect of the following:
    i) Enterprises whose equity or debt securities are listed on a recognised stock exchange in India and enterprises that are in the process of issuing equity or debt securities thatwill be listed on a recognised stock exchange in India as evidenced by the board of directors
    resolution in this regard.
    ii) All the enterprises of a group, if the parent presents consolidated financial statements and the Accounting Standard is mandatory in nature in respect of any of th enterprises of that group in terms of (i) above.

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  2. #2
    Accounting Standards
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    Thumbs up Accounting Standards Interpretation (ASI) 3 (Revised) Accounting for Taxes on Income in the situations of Tax Holiday

    Accounting Standards Interpretation (ASI) 3

    (Revised)
    Accounting for Taxes on Income in the situations of Tax Holiday under Sections 80-IA and 80-IB of the Income-tax Act, 1961
    Accounting Standard (AS) 22,Accounting for Taxes on Income
    ISSUE
    1. Sections 80-IA and 80-IB of the Income-tax Act, 1961 (hereinafter referred to as the
    ‘Act’) provide certain deductions, for certain years, in determining the taxable income of an enterprise. These deductions are commonly described as ‘tax holiday’ and the period during which these deductions are available is commonly described as ‘tax holiday period’.

    2. The issue is howAS 22 should be applied in the situations of tax-holiday under sections 80-IA and 80-IB of the Act.
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  3. #3
    Accounting Standards
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    Thumbs up Accounting Standards Interpretation (ASI)4 Losses under the head Capital Gains

    Accounting Standards Interpretation (ASI)4

    (Revised)
    Losses under the head Capital Gains
    Accounting Standard (AS) 22,Accounting for Taxes on Income
    [This revised Accounting Standards Interpretation replaces ASI 4 issued in December 2002.]
    ISSUE
    1. The issue is how AS 22 should be applied in respect of
    ‘loss’ arising
    under the head
    ‘Capital gainsof the Income-tax Act, 1961 (hereinafter
    referred to as the
    ‘Act’), which can be carried forward and set-off in future
    years, only against the income arising under that head as per the requirements
    of the Act.

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  4. #4
    Accounting Standards
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    Thumbs up Accounting Standards Interpretation (ASI) 5 Accounting for Taxes on Income in the situations of Tax Holiday

    Accounting Standards Interpretation (ASI) 5

    Accounting for Taxes on Income in the

    situations of Tax Holiday under Sections 10A and 10B of the Income-tax Act, 1961
    Accounting Standard (AS) 22,Accounting for Taxes on Income
    ISSUE
    1. Chapter III of the Income-tax Act, 1961 (hereinafter referred to as the
    ‘Act’) deals with incomes which do not form part of total income. Sections 10A and 10B of the Act are covered under Chapter III. These sections allow certain deductions, for certain years, from the total income of an assessee. These deductions are commonly described as ‘tax holiday’ and the period during which these deductions are available is commonly described as ‘tax holiday period’.

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  5. #5
    Accounting Standards
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    Thumbs up Accounting Standards Interpretation (ASI) 6 Accounting for Taxes on Income in thecontext of Section 115JB

    Accounting Standards Interpretation (ASI) 6

    Accounting for Taxes on Income in thecontext of Section 115JB of
    the Income-taxAct, 1961
    Accounting Standard (AS) 22,Accounting for Taxes on Income
    ISSUES
    1. The issue is how AS 22 is applied in a situation where a company pays tax under section 115JB (commonly referred to as Minimum Alternative Tax) of the Income-tax Act, 1961 (hereinafter referred to as the
    ‘Act’).
    2. Another issue is howdeferred tax ismeasured on the timing differences originating during the current year if the enterprise expects that these differences would reverse in a period in which it may pay tax under section 115JB of the Act.

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  6. #6
    Accounting Standards
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    Thumbs up Accounting Standards Interpretation (ASI) 7 Disclosure of deferred tax assets and deferred tax liabilities in the balance sheet of a company

    Accounting Standards Interpretation (ASI) 7

    Disclosure of deferred tax assets and
    deferred tax liabilities in the balance sheet of a company
    Accounting Standard (AS) 22,Accounting for Taxes on Income

    ISSUE
    1. The issue is how should deferred tax assets and deferred tax liabilities be disclosed in the balance sheet of a company.
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  7. #7
    Accounting Standards
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    Thumbs up Accounting Standards Interpretation (ASI) 9 Virtual certainty supported by convincing evidence

    Accounting Standards Interpretation (ASI) 9

    Virtual certainty supported by convincing evidence
    Accounting Standard (AS) 22,Accounting for Taxes on Income

    ISSUE
    1. 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”.

    2. The issue is what amounts to
    ‘virtual certainty supported by convincing evidencefor the purpose of paragraph 17 of AS 22.

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  8. #8
    Accounting Standards
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    Thumbs up Accounting Standards Interpretation (ASI) 11 Accounting for Taxes on Income in case of an Amalgamation

    Accounting Standards Interpretation (ASI) 11

    Accounting for Taxes on Income in case of an Amalgamation
    Accounting Standard (AS) 22,Accounting for Taxes on Income

    ISSUES
    1. The following issues relating to accounting for taxes on income in the case of an amalgamation are dealt with in this Interpretation:
    (i) In an amalgamation in the nature of purchase, where the consideration for the amalgamation is allocated to the individual identifiable assets/liabilities of the transferor enterprise on the basis of their fair values at the date of amalgamation as per AS 14,
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  9. #9
    Accounting Standards
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    Thumbs up Clarification on accounting standard (as) 22, accounting for taxes on income

    CLARIFICATION ON ACCOUNTING STANDARD (AS) 22,
    ACCOUNTING FOR TAXES ON INCOME
    Accounting Standard (AS) 22, Accounting for Taxes on Income, which is mandatory for certain enterprises, as specified in the standard, in respect of accounting periods commencing on or after 1-4-2001, contains the following paragraph under Transitional Provisions :
    "33. On the first occasion that the taxes on income are accounted for in accordance with this Statement, the enterprise should recognise, in the financial statements, the deferred tax balance that has accumulated prior to the adoption of this Statement as deferred tax asset/liability with a corresponding credit/charge to the revenue reserves, subject to the consideration of prudence in case of deferred tax assets (see paragraphs 15-18). The amount so credited/charged to the revenue reserves should be the same as that which would have resulted if this Statement had been in effect from the beginning."
    An issue has been raised as to whether an enterprise, which accounts for taxes on income as per AS 22 for the first time for accounting period commencing on 1st April, 2001, should use the rate of income-tax applicable on 31st March, 2001 or on 1st April, 2001, for determination of the opening balance of the accumulated deferred tax.
    The amount of deferred tax assets and liabilities represents the amount recoverable/payable in future. Accordingly, the amount of the opening balance of the accumulated deferred tax determined by using the tax rate applicable on 1st April, 2001 will give the best estimate of the amount expected to be recovered/paid on the settlement. In this context, it may be noted that paragraphs 21 and 22 of AS 22 provide that where announcements of tax rates and tax laws have the substantive effect of actual enactment, deferred tax assets and liabilities are measured using such announced tax rates and tax laws.

    Accordingly, it is clarified that an enterprise, which applies AS 22 for the first time in respect of accounting period commencing on 1st April, 2001, should determine the amount of the opening balance of the accumulated deferred tax by using the rate of income tax applicable as on 1st April, 2001.

  10. #10
    Accounting Standards
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    Thumbs up Announcement DEFERMENT OF THE APPLICABILITY OF AS 22 TO NON-CORPORATE ENTERPRISES

    Announcement
    DEFERMENT OF THE APPLICABILITY OF AS 22 TO NON-CORPORATE ENTERPRISES
    Non-corporate enterprises, such as sole proprietors, partnership firms, trusts, Hindu Undivided Families, association of persons and co-operative societies will now be required to follow Accounting Standards (AS) 22, Accounting for Taxes on Income, in respect of accounting periods commencing on or after 1-4-2006. The decision to this effect has been taken by the Council of the Institute of Chartered Accountants of India (ICAI), at its meeting, held on June 24-26, 2004. The applicability of AS 22 has been deferred for those non-corporate enterprises which were required to follow AS 22 in respect of accounting periods commencing on or after 1-4-2003.

    It may be noted that the applicability paragraphs of AS 22 provided as below:

    " Accounting Standards (AS) 22, 'Accounting for Taxes on Income', issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of accounting periods commencing on or after 1-4-2001. It is mandatory in nature for:


    1. All the accounting periods commencing on or after 01.04.2001, in respect of the following:
      1. Enterprises whose equity or debt securities are listed on a recognized stock exchange in India and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India as evidenced by the board of directors' resolution in this regard
      2. All the enterprises of a group, if the parent presents consolidated financial statements and the Accounting Standard is mandatory in nature in respect of any of the enterprises of that group in terms of (i) above.


    2. All the accounting periods commencing on or after 01.04.2002, in respect of companies not covered by (a) above.
    3. (c) All the accounting periods commencing on or after 01.04.2003, in respect of all other enterprises."

      The decision to defer the applicability of AS 22 to enterprises covered by ( c ) above so as to make it mandatory in respect of accounting periods commencing on or after 1-4-2006 instead of 1-4-2003 has been taken by the Council on a consideration of certain representations and views expressed at various forums. The decision has been taken with a view to provide some more time to such enterprises for effective implementation of AS 22.

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