Major differences between AS 22 and Ind AS 12

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.