06 October 2008
Tax impact on an item of expenditure considered for tax benefit on a deferred basis is deferred tax asset. Tax impact on an expenditure which is given in advance due to any concession by tax laws, is deferred tax liability.
06 October 2008
The DTA or DTL is the recognition of Tax Value of certain adjustments available in the Income Tax in periods different from the accounting years. The matter is dealt with by AS22 issued by ICAI.
Further, Deferred Tax Asset and Deferred Tax Liability is calculated in view of AS22 on the amount of Timing Difference and the losses c/f to next years.
The following guidelines may be followed for the calculation of deferred tax asset or liability:
1. Analyse and compare the WDV as books and Income tax as on the date of balance sheet. In case, the WDV as per books is more, a liability is to be created otherwise an asset.
2. Take out the difference of the two WDVs as said above. Apply current tax rates on the difference in WDVs, it will be ur liability or asset requirement as on the date of B.sheet for current year.
3. The difference of liability/asset as on CY b.sheet and LY B.Sheet may be adjusted to P & L a/c to make the figures to the CY requirement.
4. All other timing differences may be compared in the similar way. Say, there is increase in the figure of CF losses then the current rate applied on the new CF loss will be the requirement of asset as on date.
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