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The Indian Accounting Standard has been prescribed by the Institute of Chartered Accountant of India where the IND AS 12 has been specifically prescribed for accounting treatment on Income Tax. In any entity there are current and future tax consequences for which accounting treatments related to taxation have to be applied as per Indian Accounting Standard.
Table of Contents
Firstly it is to recognize the deferred tax liability or asset.
Then recovery or settlement of the carrying amount of an asset or liability
would make future tax payments higher or lower than such recovery or settlement
to have tax consequences.
Also, Read: Overview of AS-14: Accounting for Amalgamation.
A deferred tax liability must be recognized for all taxable temporary differences unless the deferred tax liability arises from:
Deferred tax assets must be recognized only to the extent that
future taxable profits will be available.
The factors to be considered for the recognition of Deferred Tax assets arising from the unused losses:
At the end of each reporting period, a Company should unrecognized Deferred Tax Assets.
“Deferred Tax Assets” The amount
of income taxes recoverable in future periods in respect of;
“Deferred Tax Liabilities” The
amount of income taxes payable in future periods in respect of taxable
“Accounting Profit” Profit or
loss for a period as per the books of account
“Taxable Profit” The
profit/loss for a period, determined by the rules established by the taxation
authorities, upon which income taxes are payable.
“Tax Expense” The
aggregate amount included in the determination of profit or loss for the period
in respect of current tax and deferred tax.
“Current Tax” The amount
of income taxes payable in respect of the taxable profit (loss) for a period
Major Component of tax expense (income) to be separately disclosed
According to IND-AS 12, an entity shall set off current tax assets and liabilities:
According to IND-AS 12 an entity shall setoff deferred tax and liabilities:
Hence, if the Company falls under the applicability of the Indian Accounting
Standard then it becomes mandatory to adopt the Standard and shall prepare the
Financial Statements of the entity and give the taxation treatment accordingly.
Also, Read: Applicability of Indian Accounting Standards.
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