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Notes/CA Final/Financial Reporting

CA Final · Financial Reporting

Ind AS 12 — Income Taxes

Chapter 6 · 4 formulas · 4 exam-critical pointers

Core concepts

  1. 01Current tax + Deferred tax = Total tax expense.
  2. 02Deferred tax based on temporary differences (balance sheet approach).
  3. 03Taxable temp diff → DTL; deductible temp diff & unused losses → DTA.
  4. 04DTA recognised only if probable that future taxable profit will be available.
  5. 05Tax base = amount attributable to asset/liability for tax purposes.

Flowchart summary

Deferred Tax Approach | Carrying Amount vs Tax Base | Difference = Temporary Difference | +-- Taxable -> DTL +-- Deductible -> DTA (if recoverable) | Apply enacted/substantively enacted rate

Exam-critical pointers

  • ⭐Permanent differences (e.g., disallowance under IT Act) — no deferred tax.
  • ⭐DTA on carry-forward losses requires convincing evidence of future taxable income.
  • ⭐Tax effect of business combinations adjusted in goodwill / bargain purchase.
  • ⭐Ind AS 12 differs from AS 22 — balance sheet vs P&L approach; AS 22 used income statement approach.

Make it click

Formula sheet

  • DTL = Taxable Temp Diff × Tax Rate
  • DTA = Deductible Temp Diff × Tax Rate
  • Tax Base of Asset = Future deductible amount
  • Effective Tax Rate = Total Tax Expense / Profit Before Tax

More from Financial Reporting

  1. Ch 1Conceptual Framework & Ind AS Roadmap
  2. Ch 2Ind AS 115 — Revenue from Contracts with Customers
  3. Ch 3Ind AS 116 — Leases
  4. Ch 4Ind AS 110 — Consolidated Financial Statements
  5. Ch 5Ind AS 109 — Financial Instruments
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