11-21-2009, 05:29 PM
Dear Bilal
Thanks for your reply. I mentioned in my last post (under heading 4)
QUOTE
One important thing I let you know is, there is no tax base of finance leased assets and there is no tax base of finance lease liabilities. This is weird but is real. Tax allows only rentals and does not accept or recognise any asset or liability unless the lease term is over, liabilities are Nil and assets have been transferred to operating assets.
UNQUOTE
It's very nice if you already know this. I felt it might have not been in your knoweldge that's why I said finally calculations will have to be made by you and my working is only on assumption although I knew tax base of leased assets and liability is Nil.
So, if the tax base calculated by you does not include leased assets, then your calculation is correct.
Carry forward of minimum tax is not a carry forward of un-used tax losses. There is a huge difference between the concept and purpose. If the amount mentioned by you is minimum tax then it will wholly be taken as a deductible temporary difference without further applying any taxation rate since it itself represent the tax amount that is adjustable.
So, if it is minimum tax then you have rightly included its gross figure. Your working is therefore correct here as well and given the correct result of deferred tax liability as a whole.
Minimum tax will keep on expiring after the lapse of limitation period presceribed in law and you will maintain a tax chart in your record to update the figure annually whereby the expiring year's minimum tax will be excluded and the minimum tax deposited (in the year) will be added in it.
IAS-12 requires disclosing deferred tax effect on each of taxable temporary difference and deductible temporary difference. So it will be good if you bifurcate your working into appropriate headings of disclosure. I would suggest you to treat Finance Lease Arrangement a separate item where you will calculate the deferred tax effect on the difference of WDV and Principal liability.
Your working is correct.
Regards,
KAMRAN.
Thanks for your reply. I mentioned in my last post (under heading 4)
QUOTE
One important thing I let you know is, there is no tax base of finance leased assets and there is no tax base of finance lease liabilities. This is weird but is real. Tax allows only rentals and does not accept or recognise any asset or liability unless the lease term is over, liabilities are Nil and assets have been transferred to operating assets.
UNQUOTE
It's very nice if you already know this. I felt it might have not been in your knoweldge that's why I said finally calculations will have to be made by you and my working is only on assumption although I knew tax base of leased assets and liability is Nil.
So, if the tax base calculated by you does not include leased assets, then your calculation is correct.
Carry forward of minimum tax is not a carry forward of un-used tax losses. There is a huge difference between the concept and purpose. If the amount mentioned by you is minimum tax then it will wholly be taken as a deductible temporary difference without further applying any taxation rate since it itself represent the tax amount that is adjustable.
So, if it is minimum tax then you have rightly included its gross figure. Your working is therefore correct here as well and given the correct result of deferred tax liability as a whole.
Minimum tax will keep on expiring after the lapse of limitation period presceribed in law and you will maintain a tax chart in your record to update the figure annually whereby the expiring year's minimum tax will be excluded and the minimum tax deposited (in the year) will be added in it.
IAS-12 requires disclosing deferred tax effect on each of taxable temporary difference and deductible temporary difference. So it will be good if you bifurcate your working into appropriate headings of disclosure. I would suggest you to treat Finance Lease Arrangement a separate item where you will calculate the deferred tax effect on the difference of WDV and Principal liability.
Your working is correct.
Regards,
KAMRAN.
