CA Himanshu Kawatra (Chartered Accountant and CS executive ) (55 Points)
22 June 2009While calculating deffered tax asset we consider provision for gratuity but whether we make DTA on accumulated provision or only on current year provision?
Riyaz Khan
(CA CS (Exec) MBA (Fin) Asst. General Manager-SEBI Internal Auditor-British Certifications Inc.)
(1315 Points)
Replied 22 June 2009
Consider only current year provision and not accumulated one...
CA.Rajesh Verma
(vermaraajesh39@yahoo.co.in (Dubai))
(97 Points)
Replied 23 June 2009
Dear
R D khan righly said. There is reason: Matching principle. You are making Financial stament for 1 yr and accordingly just make DTA on provision of current yr.
May GOD bless you,.
S/o Sh. Bakshi Ram Verma
Ankit Himatsingka
(Exec)
(52 Points)
Replied 25 February 2010
Himanshu,
I think your confusion is because of the method of computation of DTA.
While in India, the P&L approach of DTA computation is followed, under US GAAP the balance sheet approach is followed.
Under the P&L approach - only those incomes / expenses not allowed under current period but to be allowed in future period are added together - the corporate tax rate is applied and deferred tax charge / income computed for the current year. This figure is then added to the DTA already in the balance sheet and the corresponding impact is either income / expense in the P&L
Under the B/S approach - we look for those items in the balance sheet which have not been allowed yet and will be allowed later on. For eg., we will look for the difference in net block of assets as per companies act & as per the income tax act. The corporate tax rate is then applied to the difference. This figure is the net Deferred Tax Asset / Liability in the balance sheet. Out of this, the DTA / DTL of the previous year's balance sheet is substracted and the net result is the deferred tax charge / income in the P&L.
CAclubindia
