23 May 2008
As per AS-22, Deferred Tax (Asset or Liability) should be recognised only when there is a temporary difference between taxable income and accounting income.
Now as per AS-31, The Financial Instruments need to be marked to market and recognise the anticipated losses in books. Since these losses are not recognised by income tax. This will give rise to a difference between taxable income & accounting income.
But I am uncertain about the type of difference it should be referred to - permanent or temporary. The reason being if the actual sale of instrument results in profit, the anticipated loss becomes a permanent difference, as no loss occurs at any time and was never reversed.
23 May 2008
i think in this case we should consider these losses as temporary difference, because later we may be able to sell them at profit as u mentioned, unless there is permanent devaluation.
if later these are sold at profit, u should write back the deferred tax asset created earlier with proportionate amount.
if later sold at loss, u write back the deferred tax asset created earlier with proportionate amount and treat extra loss as permanent difference.
CAclubindia
