AS - 22 - Accounting for Taxes on Income

Accounting for income taxes: current vs deferred tax for timing differences, strict deferred tax asset recognition and disclosure requirements

Prescribes accounting treatment and disclosure for taxes on income, requiring tax expense to comprise current tax and deferred tax and to be recognised in the statement of profit and loss for the period. Mandates recognition of deferred tax for all timing differences (but not permanent differences), with deferred tax assets recognised only to the extent of reasonable certainty of realisation, and, where unabsorbed depreciation or carry-forward losses exist, only on virtual certainty supported by convincing evidence; unrecognised deferred tax assets must be reassessed at each balance sheet date. Requires current and deferred tax to be measured using applicable enacted or substantively enacted tax rates and laws, prohibits discounting of deferred tax balances, and specifies offset, separate balance sheet presentation, component disclosure, and transitional recognition of accumulated deferred tax through revenue reserves on first-time adoption.