Ind AS 12 — Questions & Answers
Round 1 — Basics 1. Scope of Ind AS 12 Applies to accounting for income taxes: current tax and
deferred tax arising from taxable profit or loss, and from temporary differences between carrying
amounts of assets/liabilities and their tax bases. It does not apply to taxes based on taxable profits
of future periods, nor to other taxes (e.g., VAT).
2. Current tax vs Deferred tax - Current tax = amount of income taxes payable (or recoverable) for
the current and prior periods, determined by taxable profit using enacted tax law. - Deferred tax =
tax effects of temporary differences and unused tax losses/credits that will result in taxable or
deductible amounts in future periods.
3. Taxable profit vs Accounting profit - Accounting profit = profit before tax per financial statements
(Ind AS basis). - Taxable profit = profit determined under tax law used to calculate current tax
payable.
4. Temporary difference — definition & examples A difference between an asset’s or liability’s
carrying amount in the statement of financial position and its tax base that will result in taxable or
deductible amounts in future periods. Examples: accounting depreciation vs tax depreciation;
provisions (not currently deductible); fair value adjustments.
5. Taxable vs Deductible temporary differences - Taxable temporary difference → future taxable
amounts → Deferred tax liability (DTL). - Deductible temporary difference → future deductible
amounts → Deferred tax asset (DTA).
Round 2 — Recognition Principles 6. When to recognise DTL? Recognise for all taxable temporary
differences, except exceptions.
7. When to recognise DTA? Recognise for deductible temporary differences, unused tax losses and
credits when probable that taxable profit will be available.
8. “Probable” criterion >50% likelihood, based on evidence.
9. DTA for unused tax losses Recognise if probable future profits exist.
10. Exceptions to DTL recognition Initial recognition exemption, investments in subsidiaries where
reversal not expected soon.
Round 3 — Measurement 11. Measurement rate Use enacted or substantively enacted rates
expected on reversal.
12. Change in tax rates Remeasure using new rate; effect in P&L; or OCI depending on related
item.
13. Substantively enacted Legislative steps completed by reporting date.
14. Deferred tax and revaluation Recognise in OCI if revaluation in OCI.
15. Investment property Follow treatment of fair value changes.
Round 4 — Presentation & Disclosure 16. Presentation Current tax: current asset/liability. Deferred
tax: non-current.
17. Offsetting Only if legal right and same authority.
18. OCI items Deferred tax follows the item.
19. Unrecognised DTA Disclose amounts and reasons.
20. Direct-to-equity items E.g., remeasurements, share-based payments, revaluation surplus.
Round 5 — Practical Scenarios 21. Depreciation difference ■5,00,000, tax rate 30% DTL =
■1,50,000. JE: Dr Income tax expense ■1,50,000 / Cr DTL ■1,50,000.
22. Provision ■2,00,000, tax rate 25% DTA = ■50,000. JE: Dr DTA ■50,000 / Cr Income tax
benefit ■50,000.
23. Business combinations Recognise deferred tax on fair value adjustments.
24. Undistributed profits of subsidiaries No DTL if control over reversal and no foreseeable reversal.
25. Initial recognition exemption E.g., asset purchase with no initial tax or accounting profit impact.
