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Deferred Tax Asset

Radhika (CA Final) (194 Points)

17 May 2010

My client is having a loss of Rs.1.27/-Crores for the F.Y09-10, considering depreciation under Companies Act, 1956.Books were finalised and Audit report is also submitted.Now the company in view of virtual certainity of profits to the tune of Rs.2.85 Crores (basing on budgeted figures and appropriate evidences) in the F.Y10-11, would like to consider deffered tax asset in the books.

Pls can any one clarify me whether after finalising every thing can a company create deferred tax asset??? also would like to know the calculation of deferred tax amount, i.e., on what amount DTA is to be calculated????

Thanks & Regards

Radhika

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6 Replies

(Guest)

I THINK if DTA will be created in the f.y 09-10 , then the audited return will have to be revised.

and the format of calculation of DTA is as follows:

opening bal of timing difference = xxxx

additions =xxxx

deletions or reversal = xxx

Closing bal =xxxx

tax rate =xxxx

DTA = tax rate x closing bal

Opeing bal of DTA =xxxxxx

Charge to P & L a/c =xxxx

so you have given the incomplete information i cant tell the exact amount but you can calculate by this format.

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Radhika (CA Final) (194 Points)
Replied 17 May 2010

thanku 4 ur ur kind response. thrs no opening balance of DTA/DTL in the F.Y.09-10. and current year thrs a loss of Rs.1.27 Crores. As the budgeted figure shows a virtual certainity of future profit i.e, to the tune of Rs.2.85Crores they(client) are in a thought to create DTA. if any further info needed, plz lemme know.

Regards

Radhika

CA Shiv (Business Controller) (2987 Points)
Replied 17 May 2010

Radhika, first of all i would like to know audited report submitted to whom? is it listed company? and if it submitted to company law board or Stock exchange than we cannot change it. Also it is created due to timing difference such as depreciation and other expense. Its not calculated on the basis of the forecast.

daya shankar singh (CA ,CS) (629 Points)
Replied 18 May 2010

If the audited books of account is not submitted with the ROC, it may be possible to change in the audited books of account and copies of revised books of account is send to each of the member to whom previously send.

For the purpose of creation of DTA

As per para 17 of AS22, Accounting for Taxes on Income, Whenever any entity have unabsorbed deprecaition and carry forward of losses . There DTA can be recognised if there virtual certainity supported with convincing evidence that there will sufficient future taxable income against which such DTA can be adjusted

DTA can be calculated in following manner

Opening bal nil

+addition 1.27cr

-deletion nil

Cl. bal 1.27 cr

tax rate (30%)

DTA (B/S value) 0.381cr

-opening bal nil

charge to P/l 0.381cr

(Guest)

pApplication of AS 22 for the first time

nThe opening balance of assets and liabilities for accounting purposes and for tax purposes are compared and the difference if any are determined.

nTax effect of these differences if any, should be recognised as deferred tax asset or liability if these differences are timing differences.

nThe enterprise should recognise, in the financial statements, the deferred tax balance that has accumulated prior to the adoption of this Statement as deferred tax asset/liability with a corresponding credit/charge to the revenue reserves, subject to the consideration of prudence in case of deferred tax assets.

nThe amount so credited/charged to the revenue reserves should be the same as that which would have resulted if this Statement had been in effect from the beginning.