ICAI issues exposure draft of revised accounting standard

Posted on 12th Jul 2021

The Institute of Chartered Accountants of India (ICAI) has come up with an exposure draft for a revised accounting standard on income taxes.

The exposure draft on Accounting Standard for Income Taxes (AS 12) is the latest among the several standards that are proposed to be revised.

It is applicable on entities that are not required to adopt the Indian Accounting Standards (Ind AS) notified by the Corporate Affairs Ministry. The comments on the draft have to be sent by June 10.

The proposed changes

One of the main change in the revised accounting standard on income taxes is on the aspect of recognition of deferred taxes.

Tax expense for the period, comprising current tax and deferred tax, shall be included in the determination of the profit or loss for the period.

Deferred tax shall be recognised for all the timing differences, subject to the consideration of probability in respect of deferred tax assets, according to the draft.

Deferred tax assets shall be recognised and carried forward only to the extent that it is probable that sufficient future taxable income will be available against which such deferred tax assets can be realised.

Where an entity has unabsorbed depreciation or carry forward of losses under tax laws, deferred tax assets shall be recognised only to the extent that it is probable that sufficient future taxable income will be available against which such deferred tax assets can be realised.

The Accounting Standard Board of ICAI has started on the process of upgradation of these standards which will be applicable to the entities to whom the Ind AS are not applicable.

The carrying amount of deferred tax assets should be reviewed at each balance sheet date. An entity shall write-down the carrying amount of a deferred tax asset to the extent that it is no longer probable, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-down may be reversed to the extent that it becomes probable , that sufficient future taxable income will be available.

By: ETCFO