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Accounting Standard-22Accounting For Taxes On

Income

Composed byCA, CS*, B Com, NCFM(CM)

Prakash Somani

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Objective

Accounting treatment of Taxes on IncomeRecognition of difference between Taxable Income & Accounting Income

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ScopeApplied in Accounting for Taxes on IncomeDetermination of DTL (Deferred Tax Liability)/DTA (Deferred tax Assets) in Financial StatementsDomestic & Foreign taxes also included

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DefinitionAccounting Income: as per Profit & Loss account before deducting TaxTaxable Income: Determination in accordance with the Tax LawsTax Expenses: Current Tax +Deferred TaxCurrent Tax: Income Tax on Taxable IncomeDeferred Tax: Tax effect of Timing DifferenceTiming Difference: Diff. in Taxable & Accounting Income– Originate in one period– Capable of being Reversal subsequently

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RecognitionTax expenses should be included in determination of Net Profit & LossTax effect of Timing differences are included in Profit & Loss and as DTA/DTL in Balance SheetPermanent Differences do not effect in DTA/DTLDeferred tax should be recognized for all Timing Differences

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MeasurementCurrent Tax measured at the amount expected to be paid using applicable Tax ratesDTA/DTL measured using tax rates enacted by Balance Sheet dateDTA/DTL should not be Discounted at Present Value

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Presentation & DisclosureOffset Assets and Liabilities representing Current Tax and DTA/DTL if enterprise have Legally enforceable RightDTA/DTL should be disclosed under the separate heading in Balance SheetMajor components of DTA/DTL should be disclosed in Notes to Accounts

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