Timing
differences vs Temporary differences
Under existing AS, deferred taxes are computed for timing
differences in respect of recognition of items of profit or loss for the
purposes of financial reporting and for income taxes. Whereas under Ind AS,
deferred taxes are computed for temporary differences between carrying amount
of an asset or liability and its tax base.
Recognition of deferred tax assets and liabilities:
Under existing
AS, deferred taxes are generally recognized for all timing differences. As per
Ind AS 12, deferred taxes are recognised for all temporary differences between
accounting and tax base of assets and liabilities expect to the extent which
arise from:
I.
Initial recognition of goodwill
II.
Asset or liability in a
transaction which is not a business combination and at the time of transactions
affects neither the accounting nor the tax profit.
Recognition of Deferred tax for unused tax losses
etc.:
Under AS -22,
deferred tax asset for unused tax losses and unabsorbed depreciation is created
in books of accounts only to the extent of virtual certainty supported by
convincing evidence about the sufficiency of future taxable income.
All other unused
credits/timings differences are recognised only to the extent of reasonable
certainty about the sufficiency of future taxable income.
Under new standard, deferred tax assets is created
in the books of accounts to the extent it is probable that taxable profit will
be available against which deductible temporary differences and unused tax losses
and
unused tax credits carried forward can be utilised.
Investments in subsidiaries, branches and Interests
in Joint Arrangements
Under AS 22, no
separate adjustment is done for deferred tax in consolidation. Deferred tax is
an aggregation from separate financial statements of each entity.
Under Ind AS 12, deferred
tax should not be recognised for temporary differences in respect of investment
in subsidiaries, branches, associates and interest in joint ventures if certain
conditions are satisfied.
Deferred tax in respect of business combination
Under AS 22,
there is no specific guidance for deferred tax in business combination.
Under Ind AS 12,
deferred tax is provided on difference between fair value of assets and tax
base of assets.
Deferred tax on unrealised intragroup profits
Under AS 22, deferred
tax on unrealised intragroup profits is not recognised.
Under Ind AS 12,
deferred taxes on elimination of intragroup profits and losses are calculated
with reference to the tax rate of the buyer at the end of the reporting period.
