Defered Tax & Current Tax

[Ali Akbar]

Further to my previous post following is the treatment of deferred tax.

Formula for calculating deferred tax is
Carrying amount - tax base=temporary difference x effective tax rate
This will give you the amount of deferred tax to be recognized in balanace sheet, in order to deteremine the status of this amount i.e whether it is deferred tax asset or deferred tax liability, following shortcut will help u alot

Temporary difference in case of asset
If carrying amount of asset (CA) > tax base then resulting deferred tax is deferred tax liability.

If CA<tax base, then resulting deferred tax is deferred tax asset.

Temporary difference in case of liability
If CA (of liability) >tax base, then resulting deferred tax is deferred tax asset.

If CA < tax base, then resulting deferred tax is deferred tax liability.

If u have understood these shortcut formulas then Inshallah u will never get beat in deferred tax issues/questions.


ICAPians, the unparalleled..