1. What is IND AS 12?
Answer: IND AS 12 is a financial reporting standard that sets out the accounting treatment for income taxes in the financial statements of an entity.
2. What is the objective of IND AS 12?
Answer: The objective of IND AS 12 is to ensure that the financial statements of an entity provide information about the current and future tax consequences of its transactions and events.
3. What are temporary differences?
Answer: Temporary differences arise when the tax base of an asset or liability is different from its carrying amount for financial reporting purposes. This results in differences between the amount of taxable income and the amount of income reported in the financial statements.
4. What is a deferred tax asset?
Answer: A deferred tax asset is an amount of tax benefit that a company can use to reduce its future tax payments. It arises when a company has overpaid taxes in the current period or has unused tax credits or tax losses that can be used in future periods to offset taxable income.
5. What is a deferred tax liability?
Answer: A deferred tax liability is an amount of tax that a company will have to pay in the future due to temporary differences between its tax base and its financial reporting basis. It arises when a company has underpaid taxes in the current period, resulting in a tax liability in the future.
6. How does IND AS 12 affect financial reporting?
Answer: IND AS 12 requires companies to recognize deferred tax assets and liabilities for temporary differences between the tax base and carrying amount of assets and liabilities. This ensures that financial statements provide a more accurate view of a company’s financial performance and position.
7. What are the disclosure requirements under IND AS 12?
Answer: The disclosure requirements under IND AS 12 include information on current and deferred tax assets and liabilities, the reconciliation of the effective tax rate to the applicable tax rate, unrecognized tax benefits, unused tax losses and credits, significant judgement and estimation, changes in tax rates, and the impact of transactions and events on income tax expense.
8. Who is required to comply with IND AS 12?
Answer: All companies that prepare financial statements in accordance with Indian Accounting Standards (IND AS) are required to comply with IND AS 12.
9. What is the difference between a temporary difference and a permanent difference?
Answer: A temporary difference arises when the tax base of an asset or liability is different from its carrying amount for financial reporting purposes, and is expected to reverse in the future. A permanent difference is a difference between taxable income and accounting income that will never reverse and therefore does not create a deferred tax asset or liability.
10. What is the tax base of an asset or liability?
Answer: The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. It is the amount that will be deductible or taxable in future periods when the asset is realized or the liability is settled.
11. What is a valuation allowance?
Answer: A valuation allowance is a reduction in the carrying amount of a deferred tax asset to the extent that it is more likely than not that some or all of the deferred tax asset will not be realized.
12. What is a tax loss carryforward?
Answer: A tax loss carryforward is a tax benefit that arises when a company has incurred tax losses in a given period that can be used to offset future taxable income. The tax losses can be carried forward for a certain period of time, subject to certain limitations.
13. Can a company recognize a deferred tax asset for tax loss carryforwards?
Answer: Yes, a company can recognize a deferred tax asset for tax loss carryforwards if it is more likely than not that the asset will be realized. The recognition of such an asset is subject to certain criteria set out in IND AS 12.
14. Can a company recognize a deferred tax liability for temporary differences?
Answer: Yes, a company can recognize a deferred tax liability for temporary differences between the tax base and carrying amount of assets and liabilities. This ensures that the company recognizes the future tax consequences of its transactions and events.
15. Can a company recognize a deferred tax asset or liability for permanent differences?
Answer: No, a company cannot recognize a deferred tax asset or liability for permanent differences. These differences do not create a future tax consequence and therefore do not impact the company’s future tax payments.
16. How does IND AS 12 impact the financial statements of a company?
Answer: IND AS 12 requires companies to recognize and measure deferred tax assets and liabilities. This can impact a company’s income tax expense, as well as its balance sheet and statement of financial position.
17. Can a company change its accounting policies related to income taxes?
Answer: Yes, a company can change its accounting policies related to income taxes, but the change must be applied retrospectively and disclosed in the financial statements.
18. How does IND AS 12 apply to entities that are exempt from income tax?
Answer: IND AS 12 still applies to entities that are exempt from income tax, as the standard is designed to ensure that financial statements provide information about the current and future tax consequences of an entity’s transactions and events.
19. What is the impact of a change in tax rates on deferred tax assets and liabilities?
Answer: A change in tax rates can impact the measurement of deferred tax assets and liabilities, as well as the income tax expense recognized in the financial statements.
20. What is the impact of an acquisition on deferred tax assets and liabilities?
Answer: An acquisition can impact the measurement of deferred tax assets and liabilities, as the tax base of assets and liabilities may change as a result of the acquisition.
21. Can a company offset deferred tax assets and liabilities?
Answer: Yes, a company can offset deferred tax assets and liabilities if it has a legally enforceable right to do so and the assets and liabilities relate to the same tax authority.
22. What is the impact of uncertain tax positions on financial reporting?
IND AS 12 requires companies to recognize and disclose uncertain tax positions, including the potential impact on the financial statements. This ensures that financial statements provide transparent and accurate information about a company’s tax liabilities.
23. What is IND AS 12 and what does it govern?
Answer: IND AS 12 is an accounting standard that governs the recognition, measurement, and disclosure of deferred tax assets and liabilities.
24.What is a deferred tax asset?
Answer: A deferred tax asset is an asset that arises when a company has overpaid its taxes or incurred tax losses that can be carried forward and used to offset future taxable income.
25.What is a deferred tax liability?
Answer: A deferred tax liability is a liability that arises when a company has underpaid its taxes or has taxable temporary differences that will result in higher tax payments in the future.
26. What is a temporary difference?
Answer: A temporary difference is the difference between the tax base of an asset or liability and its carrying amount in the financial statements, and is expected to reverse in the future.
27. What is the difference between taxable income and accounting income?
Answer: Taxable income is the income that is subject to tax under applicable tax laws, while accounting income is the income that is recognized in the financial statements under accounting standards.
28. What is the purpose of recognizing deferred tax assets and liabilities?
Answer: The purpose of recognizing deferred tax assets and liabilities is to ensure that a company recognizes the future tax consequences of its transactions and events, and provides transparent and accurate information about its tax liabilities in its financial statements.
29. How does IND AS 12 impact financial reporting?
Answer: IND AS 12 impacts financial reporting by requiring companies to recognize and measure deferred tax assets and liabilities, and to disclose information about their tax liabilities and the potential impact of uncertain tax positions on their financial statements.
30. What are the criteria for recognizing a deferred tax asset?
Answer: The criteria for recognizing a deferred tax asset include the probability of generating future taxable income, the availability of tax planning strategies to realize the asset, and the expected timing of future taxable income.
31. What are the criteria for recognizing a deferred tax liability?
Answer: The criteria for recognizing a deferred tax liability include the existence of taxable temporary differences, the expected timing of the reversal of those differences, and the applicable tax rates.
32. What are the disclosure requirements under IND AS 12?
Answer: The disclosure requirements under IND AS 12 include information about the nature and amount of deferred tax assets and liabilities, the applicable tax rates, the potential impact of uncertain tax positions, and the changes in deferred tax assets and liabilities over the reporting period.
33. What is the primary objective of IND AS 12?
A. To provide guidance on revenue recognition
B. To provide guidance on the recognition, measurement, and disclosure of deferred tax assets and liabilities
C. To provide guidance on the recognition of financial instruments
D. To provide guidance on the accounting treatment of leases
Answer: B
34. What is a deferred tax asset?
A. A tax liability that is expected to be paid in the future
B. An asset that arises when a company has overpaid its taxes or incurred tax losses that can be carried forward
C. A liability that arises when a company has underpaid its taxes
D. An asset that is expected to generate future cash flows
Answer: B
35. What is a temporary difference?
A. The difference between the tax base of an asset or liability and its carrying amount in the financial statements, and is expected to reverse in the future
B. The difference between the cost of an asset and its fair value
C. The difference between the revenue recognized in the financial statements and the cash received
D. The difference between the book value of an asset and its market value
Answer: A
36. How does a change in tax rates impact deferred tax assets and liabilities?
A. It has no impact
B. It increases the value of deferred tax assets and liabilities
C. It decreases the value of deferred tax assets and liabilities
D. It depends on the nature of the temporary difference
Answer: C
37. What are the criteria for recognizing a deferred tax asset?
A. The probability of generating future taxable income, the expected timing of future taxable income, and the availability of tax planning strategies to realize the asset
B. The existence of taxable temporary differences, the expected timing of the reversal of those differences, and the applicable tax rates
C. The probability of generating future cash flows, the expected timing of future cash flows, and the availability of financing to realize the asset
D. The existence of non-current assets, the expected timing of the sale of those assets, and the applicable tax rates
Answer: A
38. How are deferred tax assets and liabilities measured under IND AS 12?
A. At historical tax rates
B. At future tax rates
C. At the company’s effective tax rate
D. At the company’s marginal tax rate
Answer: B
39. What is the treatment of deferred tax assets and liabilities in the financial statements?
A. They are reported separately in the income statement
B. They are reported separately in the balance sheet
C. They are offset and reported as a single net amount in the balance sheet
D. They are not reported in the financial statements
Answer: C
40. What is the difference between a deductible temporary difference and a taxable temporary difference?
A. There is no difference
B. A deductible temporary difference gives rise to a deferred tax asset, while a taxable temporary difference gives rise to a deferred tax liability
C. A deductible temporary difference gives rise to a deferred tax liability, while a taxable temporary difference gives rise to a deferred tax asset
D. A deductible temporary difference and a taxable temporary difference both give rise to a deferred tax liability
Answer: B
41. How are uncertain tax positions treated under IND AS 12?
A. They are recognized as deferred tax assets
B. They are recognized as deferred tax liabilities
C. They are disclosed in the notes to the financial statements
D. They are ignored for accounting purposes
Answer: C
42. What is the impact of changes in tax laws or rates on deferred tax assets and liabilities?
A. They have no impact
B. They increase the value of deferred tax assets and liabilities
C. They decrease the value of deferred tax assets and liabilities
D. It depends on the nature of the temporary difference
Answer: D
43. What is the purpose of recognizing deferred tax assets and liabilities?
A. To show the impact of tax rates on financial performance
B. To align accounting profit with taxable profit
C. To reduce the amount of taxes payable
D. To increase the amount of taxes receivable
Answer: B
44. What is the formula for calculating the deferred tax liability or asset?
A. Tax rate * book value of the asset or liability
B. Tax rate * taxable income
C. Tax rate * temporary difference
D. Tax rate * future cash flows
Answer: C
45. What is the treatment of deferred tax assets and liabilities in the income statement?
A. They are reported separately as a gain or loss
B. They are not reported in the income statement
C. They are reported as an adjustment to income tax expense
D. They are reported as an adjustment to net income
Answer: C
46. What is the criteria for recognizing a deferred tax liability?
A. The existence of taxable temporary differences and the applicable tax rate
B. The probability of generating future taxable income and the expected timing of the reversal of temporary differences
C. The availability of tax planning strategies to realize the deferred tax asset
D. The existence of non-current assets and the expected timing of the sale of those assets
Answer: A
47. When is a deferred tax asset derecognized?
A. When it is realized through the generation of taxable income
B. When it expires or becomes unlikely to be realized
C. When the tax rate changes
D. When the book value of the asset changes
Answer: B
48. What is a temporary difference?
A. A difference between the carrying amount of an asset or liability and its tax base
B. A difference between the fair value and the carrying amount of an asset or liability
C. A difference between the nominal value and the carrying amount of an asset or liability
D. A difference between the historical cost and the carrying amount of an asset or liability
Answer: A
49. When is a deferred tax asset recognized?
A. When it is probable that the company will have sufficient taxable profit in the future to utilize the asset
B. When the asset can be carried back to offset prior year tax liabilities
C. When the asset can be used to offset future tax liabilities
D. When the tax rate is expected to decrease in the future
Answer: A
50. How are deferred tax assets and liabilities presented in the balance sheet?
A. As separate line items in the non-current assets or liabilities section
B. As separate line items in the current assets or liabilities section
C. As a single net amount in the non-current assets or liabilities section
D. As a single net amount in the current assets or liabilities section
Answer: C
51. What is the treatment of deferred tax assets and liabilities in a business combination?
A. They are not recognized until the end of the reporting period following the acquisition
B. They are recognized at their fair value at the acquisition date
C. They are recognized at their book value at the acquisition date
D. They are recognized only if the tax effect of the acquisition results in a deferred tax asset or liability
Answer: B
52. How are uncertain tax positions treated under IND AS 12?
A. They are recognized as deferred tax assets or liabilities
B. They are recognized as a reduction in income tax expense
C. They are disclosed in the notes to the financial statements
D. They are ignored for accounting purposes
Answer: C
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Disclaimer: This article provides general information existing at the time of preparation and author takes no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and author neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement.
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