25 November 2009
Refer objective statement of AS 22.
It is not a theoretical presentation for deferred taxes.
For example:
A ltd in the first year of its operation earned a profit of Rs. 100. Companies Dep. Rs.10 IT Dep. Rs.100.
PBT 100 Less: Current Taxes 0 Less: DTL 27.81 -------- PAT 72.19 -------- If DTL has not been provided management have taken decisions (Future decisions like Capital Budgeting, Dividend Decisions etc.)on the basis that profit is Rs.100.Since DTL has been provided which means certain funds have to retained for future tax liability and available funds are only Rs.72.19 and accordingly correct decisions are taken.
28 November 2009
Hi Subrahmanyam, we know there are three fundamental accounting assumption i.e. accrual, going concern and consistency. but when we make provision for taxation as per liability to pay, where do we follow accrual basis. hence under AS 22 we make the provision for tax liability which has already accrued irrespective of whether it has been paid or not. If our tax payable is more than the liability accrued, it is prepayment and shown as DTA, if IT liability is less than the accrued one then it is outstanding and shown as DTL. it is all practical and is one of the imp topic of CA Finals. Regards, CA Shakuntala Chhangani
29 November 2009
I think Future taxability is dependant on future income & it is not affected by creation of DTL in prev yr. I think DTA will be created in the coming years as the Profit as per IT will be more than Comp Act(probably which could be set-off with the DTL).
Is it possible for you to explain with an eg taking it for say 2-3 years for me to understand it better...
30 November 2009
Hey Subramanyam, don,t comment on answers. accept what you like. these are our individual interpretations. you can revert back in case you need any further explanation. Regards
30 November 2009
Oops...do not intend to say anything otherwise...tried to modify it accordingly(do let me know in case if it still needs any further tweaking)..thnx for the feedback..
30 November 2009
Nothing personal as you have appreciated my answer anyway. but our words should not discourage others. that is what is taught in professional courses. No???
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