04-22-2010, 12:12 AM
@ 1st of All , we should focus on what the question was !! Partner asked " if the business is experiencing losses then how would you recommed the company to minimize losses "
For sure this is not the job of Auditor to RECOMMEND the business how to minimize losses, so either he was asking in syntax of Consultancy or Being part of management itself !!
Where as Deffered Tax is concerned regarding minizing the losses, the concept of deffered tax ASSETS come in role play.. They generally arise where tax relief is provided after an expense is deducted for accounting purposes, eg a company may incur tax losses and be able to "carry forward" losses to reduce taxable income in future years .. a deferred tax asset should be recognised if and only if the management considered that there will be sufficient future taxable profit otherwise the value of tax asset has been IMPAIRED !!
So the answer to question was Deffered TAX ASSET !! It's not a problem presuming that the company will be making profits to use up the losses, but it does mean that from an accounting point of view (not from a cash viewpoint or anything 'real') the numbers are already taking into account the future benefits of the tax losses.
According to the Standard IAS 12 , it says that TAX ASSET is recognized for deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised...
To conclude , i would say , PARTNER QUESTION WAS " OUT OF CONTEXT " !! [xx(]
For sure this is not the job of Auditor to RECOMMEND the business how to minimize losses, so either he was asking in syntax of Consultancy or Being part of management itself !!
Where as Deffered Tax is concerned regarding minizing the losses, the concept of deffered tax ASSETS come in role play.. They generally arise where tax relief is provided after an expense is deducted for accounting purposes, eg a company may incur tax losses and be able to "carry forward" losses to reduce taxable income in future years .. a deferred tax asset should be recognised if and only if the management considered that there will be sufficient future taxable profit otherwise the value of tax asset has been IMPAIRED !!
So the answer to question was Deffered TAX ASSET !! It's not a problem presuming that the company will be making profits to use up the losses, but it does mean that from an accounting point of view (not from a cash viewpoint or anything 'real') the numbers are already taking into account the future benefits of the tax losses.
According to the Standard IAS 12 , it says that TAX ASSET is recognized for deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised...
To conclude , i would say , PARTNER QUESTION WAS " OUT OF CONTEXT " !! [xx(]
