Demystifying Accounting Standard 22 (AS 22): Understanding Deferred Taxes

AS 22: Guiding Principles: Aims to standardize income tax accounting for transparent financial reporting. Ensures accurate reflection of tax obligations in financial statements. Types of Income: Accounting income: Net profit or loss before tax expenses. Taxable income: Income as per tax laws, determining tax payable.

Differences in Income: Disallowed and partially allowed expenses create variances. Timing differences adjust in subsequent periods; permanent differences do not. AS 22 Application: Mandates recognition of deferred tax for timing differences. Ensures comprehensive reflection of transactional impacts.

Deferred Tax Asset (DTA): Arises when taxable income exceeds accounting income. Represents prepaid taxes with future benefits. Deferred Tax Liability (DTL): Occurs when accounting income surpasses taxable income. Provision for future tax payments, reflecting underpayment.

Conclusion: AS 22 facilitates accurate tax accounting for transparent financial statements. Understanding DTA and DTL aids in assessing tax obligations and benefits.