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Definition

Accounting Profit is the profit or loss for a period,

before deducting income tax expense.

Taxable Profit (tax loss) is the amount of the income

(loss) for a period, determined in accordance with the
tax laws, based upon which income tax payable
(recoverable) is determined.

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Tax Expense (tax income) is the aggregate amount
included in the determination of profit and loss for the
period in respect of current tax and deferred tax.

Current Tax is the amount of the income tax

determined to be payable (recoverable) in respect of
the taxable Profit (tax loss) for a period.

Deferred Tax liabilities are the amounts of income

taxes payable in future periods in respect of taxable
temporary differences.

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Deferred Tax Assets are the amounts of income taxes
recoverable in future periods in respect of

ë Deductible temporary differences

ë The carry forward of unused tax losses and

ë The carry forward of unused tax credits.

Tax base of an asset or liability is the amount

attributed to that asset or liability for tax purpose.

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Temporary Difference are the differences between the carrying
amount of an asset or liability in the statement of financial position
and its tax base. Temporary differences may be either

ë Taxable temporary differences, which are temporary

differences that will result in taxable amounts in determining
taxable profit (tax loss) of future periods when carrying amount
of the asset or liability is recovered or settled

ë Deductible temporary differences which are temporary

differences that will result in that are deductible in determining
taxable profit (tax loss) of future periods when carrying amount
of the asset or liability is recovered or settled

TAX BASE

ΠTAX BASE OF AN ASSET IS THE AMOUNT THAT WILL BE DEDUCTIBLE

FOR TAX PURPOSES AGAINST ANY TAXABLE ECONOMIC BENEFITS THAT
WILL FLOW TO AN ENTITY WHEN IT RECOVERS THE CARRYING AMOUNT
OF THE ASSET. IF THOSE ECONOMIC BENEFITS D

 
,
THE TAX BASE OF THE ASSET IS EQUAL TO ITS CARRYING AMOUNT

ΠTAX BASE OF A LIABILITY IS ITS CARRYING AMOUNT LESS ANY

AMOUNT THAT WILL BE DEDUCTIBLE FOR TAX PURPOSES IN RESPECT
OF THAT LIABILITY IN FUTURE PERIODS. IN THE CASE OF REVENUE
WHICH IS RECEIVED IN ADVANCE, ITS TAX BASE IS ITS CARRYING
AMOUNT, LESS ANY AMOUNT OF THE REVENUE THAT WILL NOT BE
TAXABLE IN FUTURE PERIODS.

HOW ABOUT ITEMS WHICH DOES NOT HAVE A BOOK BASE?

HOW TO CALCULATE TEMPORARY DIFFERENCES IN CONSOLIDATED

FINANCIAL STATEMENTS? 
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Recognition of current tax liabilities and current tax assets

Current Tax for current and prior periods shall, to the

extent unpaid, be recognized as a liability. If the amounts
paid exceeds the amounts due for those periods, the
excess shall be recognized as an asset

The benefit relating to a Tax loss that can be carried back

to recover current tax of a previous period shall be
recognized as an asset

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Recognition of DTA & DTL

Taxable Temporary Differences

A DTL shall be recognized for all taxable temporary differences, except

to the extent the DTL arises from

(a) The initial recognition of goodwill or

(b) the initial recognition of an asset or liability in a transaction which

(i) is not a business combination; and

(ii) at the time of transactions, affects neither accounting profit nor

taxable profit ( tax loss)

However, taxable temporary differences associates with investments in

subsidiaries, branches and associates and interests in JV¶s, shall be
recognized in accordance with Para 39
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Recognition of DTA & DTL

Deductible Temporary Differences (DTD)

A DTA shall be recognized for all DTD to the extent that it is probable
that taxable profit will be available against which the deductible
temporary differences can be utilized, unless DTA arises from the
initial recognition of an asset or liability in a transaction that

ΠIs not a business combination; and

ΠAt the time of transaction, affects neither accounting profit nor

taxable profit (tax loss)

ΠHowever, deductible temporary differences associates with

investments in subsidiaries, branches and associates and interests
in JV¶s, shall be recognized in accordance with para 44

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Unused tax losses and unused tax credits

A DTA shall be recognized for the carry forward of

unused tax losses and unused tax credits to the
extent that it is probable that future taxable
profit will be available against which the unused
tax losses and unused tax credits can be
utilized.

At every balance sheet date an entity should

reassess unrecognized DTA.
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Investments in subsidiaries, branches and associates and
interests in joint ventures

Para 39-An entity shall recognize DTL for all taxable

temporary differences associated with investments in
subsidiaries, branches and associates and interests in
JV¶s, except to the extent that both of the following
conditions are satisfied.

(a)The parent, investor or venturer is able to control the

timing of the reversal of temporary differences and

(b) It is possible that the temporary differences will not

reverse in the foreseeable future. cY
Investments in subsidiaries, branches and associates
and interests in joint ventures

Para 44-An entity shall recognize DTA for all deductible

temporary differences arising from investments in
subsidiaries, branches and associates and interests
in JV¶s, only to the extent, it is probable that

(a) The temporary difference will reverse in the

foreseeable future and

(a) Taxable profit will be available against which the

temporary difference can be utilized.
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Measurement

CTL (assets) for the current and prior periods shall be

measured at the amounts expected to be paid to
(recovered from) the taxation authorities, using the tax
rates (and tax laws) that have been enacted or
substantively enacted by the balance sheet date.

DTA and DTL shall be measured at the tax rates that are
expected to apply to the period when the asset is realized
or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by
the balance sheet date.

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Measurement
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DTA & DTL shall not be discounted

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Reversal of DTA
The carrying amount of a DTA shall be reviewed
at each balance sheet date. An entity shall
reduce the carrying amount of a DTA to the
extent that it is no longer probable that
sufficient taxable profit will be available to
allow the benefit of part of that DTA to be
utilized. Any such reduction shall be reversed to
the extent that it becomes probably that
sufficient taxable profit will be available. c
Recognition of current and deferred tax

Items recognized in profit and loss account

CT and DT shall be recognized as income or an

expense and included in P&L for the period,
except to the extent that the tax arises from

(a)A transaction or event which is recognized, in

the same or a different period, either in other
comprehensive income or directly in equity or

(b)A business combination c*

Items recognized outside profit or loss
CT and DT shall be recognized outside profit or loss if
the tax relates to the items that are recognized, in
the same or a different period, outside profit or loss.
Therefore, CT and DT that relates to items that are
recognized, in the same or a different period:

ΠIn other comprehensive income, shall be recognized

in other comprehensive income

ΠDirectly in equity, shall be recognized directly in

equity.
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Presentation and Disclosure

Offset

Tax Expense

Tax Expense (Income) related to profit or loss from ordinary

activities shall be presented in the statement of
comprehensive income.

Disclosures

Major components of tax expense (income) shall be disclosed

separately. Major component may include

Current Tax Expense, amount of DT Expense (Income) relating

to origination and reversal of temporary differences etc.,
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Further Disclosures

Aggregate of CT and DT relating to items that are charged or

credited to equity

Explanation of the relationship between tax expense (income) and

accounting profit

Explanation on changes in applicable tax rates as compared to the

previous accounting period

The amount (and expiry date if any) of deductible temporary

differences, unused tax losses and tax credits for which no DTA
is recognized.

The aggregate amount of temporary differences associated with

investments in subsidiaries, branches and associates, interests
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in JV for which DTL is not recognized
Further Disclosures

In respect of each type of temporary differences and in

respect of each type of unused tax losses and tax credits

(a) the amount of DTA and L recognized in the balance

sheet for each period presented

(b) The amount of DTI and E recognized in the income

statement.

For DTA, the nature of evidence supporting its recognition,

when DTA is dependent on future taxable profits and the
entity has suffered loss in either the current or preceding
period in the tax jurisdiction to which the DTA relates.
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Further Disclosures

In respect of discontinued operations, tax expense

relating to (i) the gain or loss on discontinuance

The amount of income tax consequence of

dividends to shareholders of the entity that
were proposed or declared before the financial
statements were authorized to be issued, but
are not recognized as a liability in the financial
statements
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