AS - 22 - Accounting for Taxes on Income

Deferred tax recognition: current and deferred tax must be recognised and measured, with prudence for deferred tax assets and disclosure.

The Standard requires recognising current tax (amounts payable or recoverable under tax law) and deferred tax (tax effects of timing differences) in the period in which related accounting revenue and expenses are recognised. Timing differences give rise to deferred tax assets or liabilities; permanent differences do not. Deferred tax is measured using enacted or substantively enacted tax rates and laws at the balance sheet date; discounting is not permitted. Deferred tax assets are recognised only to the extent of reasonable certainty of realisation, or virtual certainty with convincing evidence where unabsorbed depreciation or carry-forward losses exist. Presentation, offsetting and disclosure requirements and transitional rules are specified.