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MODULE 5 Ind AS 12

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29 views3 pages

MODULE 5 Ind AS 12

Uploaded by

Chandan KN
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MODULE:05

IND AS ON IMPACTING THE FINANCIAL STATEMENT -IND AS 12


INCOME TAX ITEMS
Introduction:
Indian Accounting Standard (Ind AS) 12 has been substituted for Accounting Standard -22,
which was previously known as "Accounting for Taxes on Income".
Scope
1. This Standard shall be applied in accounting for income taxes.
2. Income taxes encompass both domestic and international taxes that are calculated
based on taxable earnings.
3. Income taxes also encompass taxes, such as retention taxes, that must be paid by a
subsidiary, associate, or joint venture when making distributions to the reporting
entity.
Important Definitions
Definitions
 Accounting Profit: It refers to the profit or loss incurred during a specific period
prior to the deduction of tax expenses.
 Taxable Profit (tax loss): It refers to the income (loss) calculated for a specific
period based on the regulations set by the tax authorities, which determines the
amount of income taxes that need to be paid (or refunded).
 Tax Expense (Tax Income): It represents the total sum incorporated in the
calculation of profit or loss for the specific period concerning both current tax and
deferred tax.
 Current Tax: It represents the income tax amount that is owed (or can be recovered)
based on the taxable profit (or tax loss) for a specific period.
 Deferred Tax Liabilities: It represents the income tax obligations that will be due in
the future related to taxable temporary differences.
 Deferred Tax Assets: These are the amounts of income taxes recoverable in future
periods in respect of:
a) deductible temporary differences;
b) the carryforward of unused tax losses; and
c) the carryforward of unused tax credits.
Tax Expenses
 Recognition of Current Tax Liabilities and Current Tax Assets:
a) Unpaid taxes for both current and previous periods must be acknowledged as a
liability.
b) The recognition of an asset occurs when a tax loss benefit is utilized to recover
the current tax from a prior period.
c) When an entity utilizes a tax loss to offset its current tax liability from a prior
period, it acknowledges the advantage as an asset during the period in which
the tax loss is incurred.
Accounting for Current Tax Effects
1. Items recognised in profit or loss:
a) A transaction or event that is acknowledged, in the same or a separate period,
beyond profit or loss, either in other comprehensive income or directly in
equity. Or
b) A merger or acquisition (excluding the purchase by an investment entity, as
defined in Ind AS 110, Consolidated Financial Statements, of a subsidiary that
must be valued at fair value through profit or loss).

2. Items recognised outside profit or loss:


a) In other comprehensive income, shall be recognised in other comprehensive
income
b) Directly in equity, shall be recognised directly in equity
 Recognition of deferred tax liabilities and deferred tax assets:

3. A deferred tax liability will be acknowledged for all taxable temporary differences,
excluding the portion where the deferred tax liability originates from:
a) the initial recognition of goodwill; or
b) the initial recognition of an asset or liability in a transaction which:
 is not a business combination; and
 at the time of the transaction, affects neither accounting profit nor
taxable profit (tax loss).
Deductible temporary differences:
4. A deferred tax asset will be acknowledged for any deductible temporary
discrepancies, provided there is a likelihood of having taxable income to offset
the deductible temporary difference.
(a) is not a business combination; and
(b) at the time of the transaction, affects neither accounting profit nor taxable
profit (tax loss).
For temporary differences related to deductible expenses linked to investments
in subsidiaries, branches, associates, and interests in joint arrangements.

BASIS AS 22 ACCOUNTING AS12(INCOME


FOR TAXES ON TAXES)
INCOME
Recognition It recognized tax effect It recognized different
of different between between assets /or
taxable income & liabilities and their tax
accounting income bases
Approach It is based on P&L Based on B/S approach
statement approach
Differences The type of differences Applied are taxable
on which AS 22 is temporary differences
applied are timing &deductible
differences &
permanent differences
Disclosure AS 22 deals with the It deals with the
disclosure of DTA/DTL recognition of current or
in the balance sheet deferred tax as income
or expenses in P&L
statement.

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