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Thread: 07 - Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

  1. #11
    IND-AS
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    Thumbs up Initial recognition of an asset or liability of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Initial recognition of an asset or liability of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes


    Recognition of deferred tax liabilities and deferred tax assets


    Initial recognition of an asset or liability

    22. A temporary difference may arise on initial recognition of an asset or liability, for example if part or all of the cost o f an asset will not be deductible for tax purposes. The method of accounting for such a temporary difference depends on the nature of the transaction that led to the initial recognition of the asset or liability:

    (a) in a business combination, an entity recog nises any deferred tax liability or asset and this affects the amount of goodwill or bargain purchase gain it recognises (see paragraph 19);

    (b) if the transaction affects either accounting profit or taxable profit, an entity recognises any deferred tax liabi lity or asset and recognises the resulting deferred tax expense or income in profit or loss (see paragraph 59);

    (c) if the transaction is not a business combination, and affects neither accounting profit nor taxable profit, an entity would, in the absence of the exemption provided by paragraphs 15 and 24, recognise the resulting deferred tax liability or asset and adjust the carrying amount of the asset or liability by the same amount. Such adjustments would make the financial statements less transparent. Therefore, this Standard does not permit an entity to recognise the resulting deferred tax liability or asset, either on initial recognition or subsequently (see example below). Furthermore, an entity does not recognise subsequent changes in the unrecognised deferred tax liability or asset as the asset is depreciated.

    Example illustrating paragraph 22(c)

    An entity intends to use an asset which cost Rs 1,000 throughout its useful life of five years and then dispose of it for a residual value of nil. The tax rate is 40%. Depreciation of the asset is not deductible for tax purposes. On disposal, any capital gain would not be taxable and any capital loss would not be deductible.

    As it recovers the carrying amount of the asset, the entity will earn taxable income of Rs 1,000 and pay tax of Rs 400. The entity does not recognise the resulting deferred tax liability of Rs 400 because it results from the initial recognition of the asset .

    In the following year, the carrying amount of the asset is Rs 800. In earning taxable income of Rs 800, the entity will pay tax of Rs 320. The entity does not recognise the deferred tax liability of Rs 320 because it results from the initial recognition of the asset.

    23. In accordance with Ind AS 32 Financial Instruments: Presentation the issuer of a compound financial instrument (for example, a convertible bond) classifies the instrumentís liability component as a liability and the equity component as equity. In some jurisdictions, the tax base of the liability component on initial recognition is equal to the initial carrying amount of the sum of the liability and equity components. The resulting taxable temporary difference arises from the initial recognition of the equity component separately from the liability component. Therefore, the exception set out in paragraph 15(b) does not apply. Consequently, an entity recognises the resulting deferred tax liability. In accordance with paragraph 61A, the deferred tax is charged directly to the carrying amount of the equity component. In ac cordance with paragraph 58, subsequent changes in the deferred tax liability are recognised in profit or loss as deferred tax expense (income).


  2. #12
    IND-AS
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    Thumbs up Deductible temporary differences of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Deductible temporary differences of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes


    Recognition of deferred tax liabilities and deferred tax assets



    Deductible temporary differences

    24. A deferred tax asset shall be recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that :

    (a) is not a business combination; and
    (b) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

    However, for deductible temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures, a deferred tax asset shall be recognised in accordance with paragraph 44.

    25. It is inherent in the recognition of a liability that the carrying amount will be settled in future periods through an outflow from the entity of reso urces embodying economic benefits. When resources flow from the entity, part or all of their amounts may be deductible in determining taxable profit of a period later than the period in which the liability is recognised. In such cases, a temporary difference exists between the carrying amount of the liability and its tax base. Accordingly, a deferred tax asset arises in respect of the income taxes that will be recoverable in the future periods when that part of the liability is allowed as a deduction in determining taxable profit. Similarly, if the carrying amount of an asset is less than its tax base, the difference gives rise to a deferred tax asset in respect of the income taxes that will be recoverable in future periods.

    Example

    An entity recognises a liability of Rs 100 for gratuity and leave encashment expenses by creating a provision for gratuity and leave encashment . For tax purposes, any amount with regard to gratuity and leave encashment will not be deductible until the entity pays the same. The tax rate is 25%.

    The tax base of the liability is nil (carrying amount of Rs 100, less the amount that will be deductible for tax purposes in respect of that liability in future periods). In settling the liability for its carrying amount, the entity will reduce its future taxable profit by an amount of Rs 100 and, consequently, reduce its future tax payments by Rs 25 (Rs 100 at 25%). The difference between the carrying amount of Rs 100 and the tax base of nil is a deductible temporary difference of Rs 100. Therefore, the entity recognises a deferred tax asset of Rs 25 (Rs 100 at 25%), provided that it is probable that the entity will earn sufficient taxable profit in future periods to benefit from a reduction in tax payments.

    26. The following are examples of deductible temporary differences that result in deferred tax assets:

    (a) retirement benefit costs may be deducted in determining accounting profit as service is provided by the employee, but deducted in determining taxable profit either when contributions are paid to a fund by the entity or when retirement benefits are paid by the entity. A temporary difference exists between the carrying amount of the liability and its tax base; the tax base of the liability is usually nil. Such a deductible temporary diffe rence results in a deferred tax asset as economic benefits will flow to the entity in the form of a deduction from taxable profits when contributions or retirement benefits are paid;

    (b) preliminary expenses are recognised as an expense in determining accounting profit in the period in which they are incurred but may not be permitted as a deduction in determining taxable profit (tax loss) until a later period(s). The difference between the tax base of the preliminary expenses, being the amount permitted as a deduction in future periods under taxation laws, and the carrying amount of nil is a deductible temporary difference that results in a deferred tax asset;

    (c) with limited exceptions, an entity recognises the identifiable assets acquired and liabilities assumed in a business combination at their fair values at the acquisition date. When a liability assumed is recognised at the acquisition date but the related costs are not deducted in determining taxable profits until a later period, a deductible temporary difference arises which results in a deferred tax asset. A deferred tax asset also arises when the fair value of an identifiable asset acquired is less than its tax base. In both cases, the resulting deferred tax asset affects goodwill (see paragraph 66); and

    (d) certain assets may be carried at fair value, or may be revalued, without an equivalent adjustment being made for tax purposes (see paragraph 20). A deductible temporary difference arises if the tax base of the asset exceeds its carrying amount.

    27. The reversal of deductible temporary differences results in deductions in determining taxable profits of future periods. However, economic benefits in the form of reductions in tax payments will flow to the entity only if it earns sufficient taxable profits against which the deductions can be offset. Therefore, an entity recognises deferred tax assets only when it is probable that taxable profits will be available against which the deductible temporary differences can be utilised.

    28. It is probable that taxable profit will be available against which a deductible temporary difference can be utilised when there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity which are expected to reverse:

    (a) in the same period as the expected reversal of the deductible temporary difference; or
    (b) in periods into which a tax loss arising from the deferred tax asset can be carried back or forward.

    In such circumstances, the deferred tax asset is recognised in the period in which the deductible temporary differences arise.

    29. When there are insufficient taxable temporary differences relating to the same taxation authority and the same taxable entity, the deferred tax asset is recognised to the extent that:

    (a) it is probable that the entity will have sufficient taxable profit relating to the same taxation authority and the same taxable entity in the same period as the reversal of the deductible temporary difference (or in the periods into which a tax loss arising from the deferred tax as set can be carried back or forward). In evaluating whether it will have sufficient taxable profit in future periods, an entity ignores taxable amounts arising from deductible temporary differences that are expected to originate in future periods, because t he deferred tax asset arising from these deductible temporary differences will itself require future taxable profit in order to be utilised; or

    (b) tax planning opportunities are available to the entity that will create taxable profit in appropriate periods.

    30. Tax planning opportunities are actions that the entity would take in order to create or increase taxable income in a particular period before the expiry of a tax loss or tax credit carryforward. For example, in some jurisdictions, taxable profit may be created or increased by:

    (a) electing to have interest income taxed on either a received or receivable basis;
    (b) deferring the claim for certain deductions from taxable profit;
    (c) selling, and perhaps leasing back, assets that have appreciated but for which the tax base has not been adjusted to reflect such appreciation; and
    (d) selling an asset that generates non -taxable income (such as, in some jurisdictions, a government bond) in order to purchase another investment that generates taxable income.

    Where tax planning opportunities advance taxable profit from a later period to an earlier period, the utilisation of a tax loss or tax credit carry forward still depends on the existence of future taxable profit from sources other than future originating temporary differences.

    31. When an entity has a history of recent losses, the entity considers the guidance in paragraphs 35 and 36.

    32. [Refer to Appendix 1]


  3. #13
    IND-AS
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    Thumbs up Goodwill of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Goodwill of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes


    Recognition of deferred tax liabilities and deferred tax assets


    Goodwill

    32A. If the carrying amount of goodwill arising in a business combination is less than its tax base, the difference gives rise to a deferred tax asset. The deferred tax asset arising from the initial recognition of goodwill shall be recognised as part of the accounting for a business combination to the extent that it is probable that taxable profit will be available against which the deductible temporary difference could be utilised.



  4. #14
    IND-AS
    Guest

    Thumbs up Initial recognition of an asset or liability of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Initial recognition of an asset or liability of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes


    Recognition of deferred tax liabilities and deferred tax assets


    Initial recognition of an asset or liability

    33. One case when a deferred tax asset arises on initial recognition of an asset is when a non-taxable government grant related to an asset is s et up as deferred income in which case the difference between the deferred income and its tax base of nil is a deductible temporary difference. In this case, the entity does not recognise the resulting deferred tax asset, for the reason given in paragraph 22.


  5. #15
    IND-AS
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    Thumbs up Unused tax losses and unused tax credits of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Unused tax losses and unused tax credits of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes

    Recognition of deferred tax liabilities and deferred tax assets



    Unused tax losses and unused tax credits

    34. A deferred tax asset shall be recognised for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.

    35. The criteria for recognising deferred tax assets arising from the carryforward of unused tax losses and tax credits are the same as the criteria for recognising deferred tax assets arising from deductible temporary differences. However, the existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, when an entity has a history of recent losses, the entity recognises a deferred tax asset arising from unused tax losses or tax credits only to the extent that the entity has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the entity. In such circumstances, paragraph 82 requires disclosure of the amount of the deferred tax asset and the nature of the evidence supporting its recognition.


    36. An entity considers the following criteria in assessing the probability that taxable profit will be available against which the unused tax losses or unused tax credits can be utilised:

    (a) whether the entity has sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity, which wil l result in taxable amounts against which the unused tax losses or unused tax credits can be utilised before they expire;
    (b) whether it is probable that the entity will have taxable profits before the unused tax losses or unused tax credits expire;
    (c) whether the unused tax losses result from identifiable causes which are unlikely to recur; and
    (d) whether tax planning opportunities (see paragraph 30) are available to the entity that will create taxable profit in the period in which the unused tax losses or unused tax credits can be utilised.

    To the extent that it is not probable that taxable profit will be available against which the unused tax losses or unused tax credits can be utilised, the deferred tax asset is not recognised.


  6. #16
    IND-AS
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    Thumbs up Reassessment of unrecognised deferred tax assets of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Reassessment of unrecognised deferred tax assets of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes

    Recognition of deferred tax liabilities and deferred tax assets



    Reassessment of unrecognised deferred tax assets

    37. At the end of each reporting period, an entity reassesses unrecognised deferred tax assets. The entity recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. For example, an improvement in trading conditions may make it more probable that the entity will be able to generate sufficient taxable profit in the future for the deferred tax asset to meet the recognition criteria set out in paragraph 24 or 34. Another example is when an entity reassesses deferred tax assets at the date of a business combination or subsequently (see paragraphs 67 and 68).


  7. #17
    IND-AS
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    Thumbs up Investments in subsidiaries, branches and associates and interests in joint ventures of Indian Accounting Standard (Ind AS) 12

    Investments in subsidiaries, branches and associates and interests in joint ventures of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes

    Recognition of deferred tax liabilities and deferred tax assets



    Investments in subsidiaries, branches and associates and interests in joint ventures

    38. Temporary differences arise when the carrying amount of investments in subsidiaries, branches and associates or interests in joint ventures (namely the parent or investorís share of the net assets of the subsidiary, branch, associate or investee, including the carrying amount of goodwill) becomes different from the tax base (which is often cost) of the investment or interest. Such differences may arise in a number of different circumstances, for example:

    (a) the existence of undistributed profits o f subsidiaries, branches, associates and joint ventures;
    (b) changes in foreign exchange rates when a parent and its subsidiary are based in different countries; and
    (c) a reduction in the carrying amount of an investment in an associate to its recoverable amount.

    In consolidated financial statements, the temporary difference may be different from the temporary difference associated with that investment in the parentís separate financial statements if the parent carries the investment in its separate financial statements at cost or revalued amount.

    39. An entity shall recognise a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures, except to the extent that both of the following conditions are satisfied:

    (a) the parent, investor or venturer is able to control the timing of the reversal of the temporary difference; and
    (b) it is probable that the temporary difference will not reverse in the foreseeable future.

    40. As a parent controls the dividend policy of its subsidiary, it is able to control the timing of the reversal of temporary differences associated with that investment (including the temporary differences arising not only from undistributed profits but also from any foreign exchange translation differences). Furthermore, it would often be impracticable to determine the amount of income taxes that would be payable when the temporary difference reverses. Therefore, when the parent has determined that those profits will not be distributed in the foreseeable future the parent does not recognise a deferred tax liability. The same considerations apply to investments in branches.

    41. The non-monetary assets and liabilities of an entity are measured in its functional currency (see Ind AS 21 The Effects of Changes in Foreign Exchange Rates ). If the entityís taxable profit or tax loss (and, hence, the tax base of its non -monetary assets and liabilities) is determined in a different currency, changes in the exchange rate give rise to temporary differences that result in a recognised deferred tax liability or (subject to paragraph 24) asset. The resulting deferred tax is charged or credited to profit or loss (see paragraph 58).

    42. An investor in an associate does not control that entity and is usually not in a position to determine its dividend policy. Therefore, in the absence of an agreement requiring that the profits of the associate will not be distributed in the foreseeable future, an investor recognises a deferred tax liability arising from taxable temporary differences associated with its investment in the associate. In some cases, an investor may not be able to determine the amount of tax that would be payable if it recovers the cost of its investment in an associate, but can determine that it will equal or exceed a minimum amount. In such cases, the deferred tax liability is measured at this amount.

    43. The arrangement between the parties to a joint venture usually deals with the sharing of the profits and identifies whether decisions on such matters require the consent of all the venturers or a specified majority of the venturers. When the venturer can control the sharing of profits and it is probable that the profits will not be distributed in the foreseeable future, a deferred tax liability is not recognised.

    44. An entity shall recognise a deferred tax asset for all deductible temporary differences arising from investments in subsidiaries, branches and associates, and interests in joint ventures, to the extent that, and only to the extent that, it is probable that:
    (a) the temporary difference will reverse in the foreseeable future; and
    (b) taxable profit will be available against which the temporary difference can be utilised.

    45. In deciding whether a deferred tax asset is recognised for deductible temporary differences associated with its investments in subsidiaries, branches and associates, and its interests in joint ventures, an entity considers the guidance set out in paragraphs 28 to 31.


  8. #18
    IND-AS
    Guest

    Thumbs up Measurement of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Measurement of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes



    Measurement

    46. Current tax liabilities (assets) for the current and prior periods shall be measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

    47. Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

    48. Current and deferred tax assets and liabilities are usually measured using the tax rates (and tax laws) that have been enacted. However, in some jurisdictions, announcements of tax rates (and tax laws) by the government have the substantive effect of actual enactment, which may follow the announcement by a period of several months. In these circumstances, tax assets and liabilities are measured using the announced tax rate (and tax laws).

    49. When different tax rates apply to different levels of taxable income, deferred tax assets and liabilities are measured using the average rates that are expected to apply to the taxable profit (tax loss) of the periods in which the temporary differences are expected to reverse.

    50. [Refer to Appendix 1]

    51. The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that would follow from the manner in which the entity expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

    52. In some jurisdictions, the manner in which an entity recovers (settles) the carrying amount of an asset (liability) may affect either or both of:

    (a) the tax rate applicable when the entity recovers (settles) the carrying amount of the asset (liability); and
    (b) the tax base of the asset (liability).

    In such cases, an entity measures deferred tax liabilities and deferred tax assets using the tax rate and the tax base that are consistent with the expected manner of recovery or settlement.


    Example A

    An asset has a carrying amount of Rs 100 and a tax base of Rs 60. A tax rate of 20% would apply if the asset were sold and a tax rate of 30% would apply to other income.

    The entity recognises a deferred tax liability of Rs 8 (Rs 40 at 20%) if it expects to sell the asset without further use and a deferred tax liability of Rs 12 (Rs 40 at 30%) if it expects to retain the asset and recover its carrying amount through use.


    Example B

    An asset with a cost of Rs 100 and a carrying amount of Rs 80 is revalued to Rs 150. No equivalent adjustment is made for tax purposes. Cumulative depreciation for tax purposes is Rs 30 and the tax rate is 30%. If the asset is sold for more than cost, the cumulative tax depreciation of Rs 30 will be included in taxable income but sale proceeds in excess of cost will not be taxable.

    The tax base of the asset is Rs 70 and there is a taxable temporary difference of Rs 80. If the entity expects to recover the carrying amount by using the asset, it must generate taxable income of Rs 150, but will only be able to deduct depreciation of Rs 70. On this basis, there is a deferred tax liability of Rs 24 (Rs 80 at 30%). If the entity expects to recover the carrying amount by selling the asset immediately for proceeds of Rs 150, the deferred tax liability is computed as follows:


    Taxable
    Temporary
    Difference
    (Amount in Rs)
    Tax Rate
    Deferred Tax
    Liability
    (Amount in Rs)
    Cumulative tax
    depreciation
    30
    30%
    9
    Proceeds in excess of
    cost
    50
    nil
    -
    Total
    80

    9


    (note:
    in accordance with paragraph 61A, the additional deferred tax that arises on the revaluation is recognised in other comprehensive income)


    Example C

    The facts are as in example B, except that if the asset is sold for more than cost, the cumulative tax depreciati on will be included in taxable income (taxed at 30%) and the sale proceeds will be taxed at 40%, after deducting an inflation - adjusted cost of Rs 110.

    If the entity expects to recover the carrying amount by using the asset, it must generate taxable income of Rs 150, but will only be able to deduct depreciation of Rs 70. On this basis, the tax base is Rs 70, there is a taxable temporary difference of Rs 80 and there is a deferred tax liability of Rs 24 (Rs 80 at 30%), as in example B.

    If the entity expects to recover the carrying amount by selling the asset immediately for proceeds of Rs 150, the entity will be able to deduct the indexed cost of Rs 110. The net proceeds of Rs 40 will be taxed at 40%. In addition, the cumulative tax depreciation of Rs 30 will be included in taxable income and taxed at 30%. On this basis, the tax base is Rs 80 (Rs 110 less Rs 30), there is a taxable temporary difference of Rs 70 and there is a deferred tax liability of Rs 25 (Rs 40 at 40% plus Rs 30 at 30%). If the tax base is not immediately apparent in this example, it may be helpful to consider the fundamental principle set out in paragraph 10.

    (note: in accordance with paragraph 61A, the additional deferred tax that arises on the revaluation is recognised in other comprehensive income)

    52A. In some jurisdictions, income taxes are payable at a higher or lower rate if part or all of the net profit or retained earnings is paid out as a dividend to shareholders of the entity. In some other jurisdictions, income taxes may be refundable or payable if part or all of the net profit or retained earnings is paid out as a dividend to shareholders of the entity. In these circumstances, current and deferred tax assets and liabilities are measured at the tax rate applicable to undistributed profits.

    52B. In the circumstances described in paragraph 52A, the income tax consequences of dividends are recognised when a liability to pay the dividend is recognised. The income tax consequences of dividends are more directly linked to past transactions or events than to distributions to owners. Therefore, the income tax consequences of dividends are recognised in profit or loss for the period as required by paragraph 58 except to the extent that the income tax consequences of dividends arise from the circumstances described in paragraph 58(a) and (b).


    Example illustrating paragraphs 52A and 52B


    The following example deals with the measurement of current and deferred tax assets and liabilities for an entity in a jurisdiction where income taxes are payable at a higher rate on undistributed profits (50%) with an amount being refundable when profits are distributed. The tax rate on distributed profits is 35%. At the end of the reporting period, 31 December 20X1, the entity does not recognise a liability for dividends proposed or declared after the reporting period. As a result, no dividends are recognised in the year 20X1. Taxable income for 20X1 is Rs 100,000. The net taxable temporary difference for the year 20X1 is Rs 40,000.

    The entity recognises a current tax liability and a current income tax expense of Rs 50,000. No asset is recognised for the amount potentially recoverableas a result of future dividends. The entity also recognises a deferred tax liability and deferred tax expense of Rs 20,000 (Rs 40,000 at 50%) representing the income taxes that the entity will pay when it recovers or settles the carrying amounts of its assets and liabilities based on the tax rate applicable to undistributed profits.

    Subsequently, on 15 March 20X2 the entity recognises dividends of Rs 10,000 from previous operating profits as a liability.

    On 15 March 20X2, the entity recognises the recovery of income taxes of Rs 1,500 (15% of the dividends recognised as a liability) as a current tax asset and as a reduction of current income tax expense for 20X2.

    53. Deferred tax assets and liabilities shall not be discounted.


    54. The reliable determination of deferred tax assets and liabilities on a discounted basis requires detailed scheduling of the timing of the reversal of ea ch temporary difference. In many cases such scheduling is impracticable or highly complex. Therefore, it is inappropriate to require discounting of deferred tax assets and liabilities. To permit, but not to require, discounting would result in deferred tax assets and liabilities which would not be comparable between entities. Therefore, this Standard does not require or permit the discounting of deferred tax assets and liabilities.

    55. Temporary differences are determined by reference to the carrying amount of an asset or liability. This applies even where that carrying amount is itself determined on a discounted basis, for example in the case of retirement benefit obligations (see Ind AS 19 Employee Benefits).

    56. The carrying amount of a deferred tax asset shall be reviewed at the end of each reporting period. An entity shall reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.



  9. #19
    IND-AS
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    Thumbs up Recognition of current and deferred tax of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Recognition of current and deferred tax of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes


    Recognition of current and deferred tax

    57. Accounting for the current and deferred tax effects o f a transaction or other event is consistent with the accounting for the transaction or event itself. Paragraphs 58 to 68C implement this principle.



  10. #20
    IND-AS
    Guest

    Thumbs up Items recognised in profit or loss of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22) - Income Taxes

    Items recognised in profit or loss of Indian Accounting Standard (Ind AS) 12 - Earlier Accounting standard (22)

    Income Taxes


    Recognition of current and deferred tax



    Items recognised in profit or loss

    58. Current and deferred tax shall be recognised as income or an expense a nd included in profit or loss for the period, except to the extent that the tax arises from:

    (a) a transaction or event which is recognised, in the same or a different period, outside profit or loss, either in other comprehensive income or directly in equity (see paragraphs 61A to 65); or
    (b) a business combination (see paragraphs 66 to 68).

    59. Most deferred tax liabilities and deferred tax assets arise where income or expense is included in accounting profit in one period, but is included in taxable profit (tax loss) in a different period. The resulting deferred tax is recognised in profit or loss. Examples are when:

    (a) interest, royalty or dividend revenue is received in arrears and is included in accounting profit on a time apportionment basis in accordance with Ind AS 18 Revenue, but is included in taxable profit (tax loss) on a cash basis; and

    (b) costs of intangible assets have been capitalised in accordance with Ind AS 38 and are being amortised in profit or loss, but were deducted for tax purposes when they were incurred.

    60. The carrying amount of deferred tax assets and liabilities may change even though there is no change in the amount of the related temporary differences. This can result, for example, from:
    (a) a change in tax rates or tax laws;
    (b) a reassessment of the recoverability of deferred tax assets; or
    (c) a change in the expected manner of recovery of an asset.

    The resulting deferred tax is recognised in profit or loss, except to the extent that it relates to items previously recognised outside profit or loss (s ee paragraph 63).

    Last edited by IND-AS; 01-02-2011 at 12:11 PM.

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