CALCULATION OF NET WORTH

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2009 Dear sir,

Should we add back "Deferred tax Liability" while calculating Net worth of Company and vice versa "Deferred tax Asset".

Could you please give reason behind your answer.

chetan soni

chetan soni (Expert)
Follow

11 November 2009 No adjustment should be given for deffered tax liability or asset. As the same will be provision against income tax liability to give the fair value of balance sheet.

Net worth means funds available to shareholders/ proprietor after deducting all the liabilities.

This is also kind of asset or liability of income tax.

Taranjit Singh

Taranjit Singh (Expert)
Follow

11 November 2009 "networth" means aggregate of value of paid up equity
capital and free reserves (excluding reserves cerated out
of revaluation)reduced by the aggregate value of
accumilated losses and deffered expenditure not written off
(including miscellaneous expenses not written off)

Upgrade to CAclubindia Pro. Subscribe Now!

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
Follow

11 November 2009 Deferred tax assets and liabilities can be set off, if the items relate to taxes on income levied by the same governing taxation laws.

Deferred tax assets = xx
Less:-Deferred tax liabilities = xx

Net result = xx

Net result will be consider for calculation Net worth.

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
Follow

11 November 2009 i agree with Taranjit.

shakuntala chhangani

shakuntala chhangani (Expert)
Follow

11 November 2009 Hi, with due respect to all the above answers
Net worth means equity. equity is defined as residual interest in the assets of the enterprise after deducting all its liabilities. thus, equity is the excess of aggregate assets of an enterprise over its aggregate liabilities. It is calculated as
Fixed assets + investments + current assets and loans and advances+deferred tax asset- all outside liabilities including deferred tax liability OR
Share Capital + Reserves and Surplus - Miscellaneous Expenditure (to the extent not written off) deferred tax liability/asset is a liability which arise in the current period due to timing difference and will reverse in future. therefore the same is required to be considered while calculating Net Worth.
regards, CA Shakuntala Chhangani

Message likes : 4 times