16 September 2008
Can anybody provide me the calculator sheet for Deferred Tax Liabilities/Assets, or can anyone explain me the method of adjusting the opening DTL/DTA taking into effect the difference in opening tax rates and closing tax rate
16 September 2008
The following guidelines may be followed as a Golden Rule 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.
16 September 2008
Sir, do we not adjust the difference in tax rate, say for example, my op DTL was Rs. 100,000 which was created when tax rate 33.66%. Now, as the tax rate has slashed to 30.90%, then should we not bring down the opening DTL to 91800/- i.e(100000/33.66*30.9), and then adjust the current year's DTL into opening balance. Please clarify.
16 September 2008
Yes, definitely it is to be adjusted. That is why, I have suggested that the whole DTL and DTA be calculated afresh. The adjustment will automatically be taken care by the formula. Pl see the formula suggested by me. One more thing may pl be noted Mr. Tarun, that the DTL and DTA is to be provided on the Current rates. In case the rates for next year have also changed and are available as on date then the same may be calculated on new rates. It has been said in AS22 that the DTA and DTL may be provided at rates which have 'substantially been enacted'.
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