Accounting Standard-22 Accounting For Taxes On Income

1. Accounting Standard-22Accounting For Taxes On Income Composed by CA, CS*, B Com, NCFM(CM) PrakashSomani

2. Objective • Accounting treatment of Taxes on Income • Recognition of difference between Taxable Income & Accounting Income

3. Scope • Applied in Accounting for Taxes on Income • Determination of DTL (Deferred Tax Liability)/DTA (Deferred tax Assets) in Financial Statements • Domestic & Foreign taxes also included

4. Definition • Accounting Income: as per Profit & Loss account before deducting Tax • Taxable Income: Determination in accordance with the Tax Laws • Tax Expenses: Current Tax +Deferred Tax • Current Tax: Income Tax on Taxable Income • Deferred Tax: Tax effect of Timing Difference • Timing Difference: Diff. in Taxable & Accounting Income • Originate in one period • Capable of being Reversal subsequently

5. Recognition • Tax expenses should be included in determination of Net Profit & Loss • Tax effect of Timing differences are included in Profit & Loss and as DTA/DTL in Balance Sheet • Permanent Differences do not effect in DTA/DTL • Deferred tax should be recognized for all Timing Differences

6. Measurement • Current Tax measured at the amount expected to be paid using applicable Tax rates • DTA/DTL measured using tax rates enacted by Balance Sheet date • DTA/DTL should not be Discounted at Present Value

7. Presentation & Disclosure • Offset Assets and Liabilities representing Current Tax and DTA/DTL if enterprise have Legally enforceable Right • DTA/DTL should be disclosed under the separate heading in Balance Sheet • Major components of DTA/DTL should be disclosed in Notes to Accounts

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