Advanced Accounting · AS 22 Accounting for Taxes on Income

Presentation and Disclosure under AS 22 for CA Inter

Updated 4 October 2026 · Fact-checked

AS 22 presentation and disclosure tells you where deferred tax appears and what to report. Show deferred tax assets and liabilities separately from current assets and current liabilities. Offset them only if you have a legal right to set off current tax and both relate to the same taxing authority. Disclose the key amounts in the notes.

Understand Presentation and Disclosure under AS 22

Deferred tax is not a current item. AS 22 says deferred tax assets (DTA) and deferred tax liabilities (DTL) must be shown separately from current assets and current liabilities. In a company balance sheet under Schedule III, the captions are "deferred tax liabilities (net)" under non-current liabilities and "deferred tax assets (net)" under non-current assets.

The word "net" matters. The net figure is shown only where the AS 22 offset conditions are met. AS 22 allows you to offset a DTA against a DTL only when two conditions are both met. First, the enterprise has a legally enforceable right to set off assets against liabilities representing current tax. Second, the DTA and DTL relate to taxes on income levied by the same governing taxation law. If either condition fails, show the DTA and DTL gross.

The deferred tax charge or credit for the year goes through the statement of profit and loss, as part of tax expense. It is not a balance sheet-only entry. The balance sheet shows the cumulative closing balance. Whether you present gross or net does not change the profit and loss charge. The charge is the total movement in deferred tax balances.

The standard also requires disclosures. The main ones are the break-up of the deferred tax balances by major timing difference, and, where a DTA is recognised on unabsorbed depreciation or carried forward losses, the amount of that DTA and the nature of the evidence supporting its recognition. The break-up is usually given in a note, such as depreciation, expenses allowed on payment, and carried forward losses.

Recognition of a DTA has two levels of certainty. A DTA on timing differences other than unabsorbed depreciation or carried forward losses is recognised only where there is reasonable certainty that sufficient future taxable income will be available. A DTA on unabsorbed depreciation or carried forward losses needs a higher test: virtual certainty, supported by convincing evidence, of future taxable income against which it can be realised.

Think of it as three questions. Where is it shown? Can I net it? What do I say in the notes? The rest of this page answers these in order.

Key rules to remember

Balance sheet classification: DTA and DTL are shown separately from current assets and current liabilities; Under Schedule III, the captions are deferred tax assets (net) and deferred tax liabilities (net), among non-current items. The net figure is shown only where the offset conditions are met. Otherwise show them gross.
Offsetting condition 1: Legally enforceable right to set off current tax assets against current tax liabilities; Both offsetting conditions must be met.
Offsetting condition 2: DTA and DTL relate to taxes on income levied by the same governing taxation law; If not met, show DTA and DTL gross.
Net deferred tax position: Net = Total DTL − Total DTA (if offset is allowed); A positive result is a net DTL. A negative result is a net DTA.
Deferred tax in profit and loss: Deferred tax charge/(credit) for the year = Closing net DTL − Opening net DTL; Assumes no deferred tax adjusted directly elsewhere. Treat an increase in net DTL as an expense. The charge is the total of the movements in the individual DTA and DTL balances, whether presented gross or net.
Recognition test for DTA: DTA on other timing differences: reasonable certainty. DTA on unabsorbed depreciation or carried forward losses: virtual certainty; Virtual certainty must be supported by convincing evidence of future taxable income. The carrying amount of all deferred tax assets is reviewed at each balance sheet date, and unrecognised deferred tax assets are reassessed too.
Key disclosures: Break-up of DTA and DTL by major components; amount of DTA and nature of evidence where DTA is recognised on unabsorbed depreciation or carried forward losses; Disclose both the DTA amount and the evidence. Also show the deferred tax charge or credit in the statement of profit and loss.

How to solve Presentation and Disclosure under AS 22 questions

Use this order for any presentation or disclosure question on AS 22. It keeps your answer complete and gives step marks.

1List each timing difference and mark it as giving a DTA or a DTL.
2Compute the closing balance of each item at the enacted or substantively enacted tax rate.
3Check the two offsetting conditions: legal right to set off current tax, and same taxing law. Write whether each is met.
4If both are met, offset and show the net figure. If not, show DTA and DTL gross.
5Place the balance in the balance sheet: DTL under non-current liabilities, DTA under non-current assets.
6Compute the charge or credit for the year by comparing closing and opening balances of each component, and show the total in the statement of profit and loss.
7Write the note: break-up by component, and for any DTA on unabsorbed depreciation or carried forward losses, the amount of the DTA and the nature of the evidence, since virtual certainty is required.

Quickest way: Four-line check for presentation questions

When to use it: Use this for MCQs and for short written parts where time is tight.

MCQs: if the option says deferred tax is shown under current assets or current liabilities, reject it.
MCQs: if an option offsets without mentioning the legal right to set off, treat it with suspicion.
Written: first write the two offsetting conditions, then apply them to the facts. This earns the conclusion mark.
Written: end with the balance sheet line, for example "Deferred tax liabilities (net): ₹X", and the note break-up.

Common mistakes in Presentation and Disclosure under AS 22

Showing deferred tax under current assets or current liabilities.
Students link tax with short-term payables like provision for tax.
Fix: Remember that deferred tax is separate from current items. Under Schedule III it is non-current.
Offsetting DTA and DTL automatically.
Students see both balances and simply net them.
Fix: Offset only when the legal right to set off current tax exists and both relate to the same taxation law. State both conditions.
Stating only one offsetting condition.
Students recall the legal right but forget the same-law condition, or the reverse.
Fix: Both conditions must be met together. Write them as a pair.
Taking the whole closing balance to profit and loss.
Students confuse the balance sheet figure with the year's charge.
Fix: The charge is the change in the balances during the year, not the closing balance.
Forgetting the disclosure of the amount and evidence for DTA on losses.
Students focus on numbers and skip the narrative disclosures.
Fix: Add a line giving the amount of the DTA and the nature of evidence supporting it when it arises from unabsorbed depreciation or carried forward losses. Remember such a DTA needs virtual certainty backed by convincing evidence, while a DTA on other timing differences needs only reasonable certainty.
Showing the DTA and DTL net while giving no break-up.
Students think the net figure is enough.
Fix: Give the component-wise break-up in the note even when the face shows a net figure.

Worked examples

Example 1

At the year end, Alpha Ltd has a DTL of ₹8,40,000 on depreciation and a DTA of ₹3,10,000 on expenses allowed for tax only on payment. Both relate to the same tax law and the company has a legal right to set off current tax assets against current tax liabilities. Show the balance sheet presentation.

Show the solution

Both offsetting conditions are met: legal right to set off exists, and same taxing law applies.
So the DTA can be offset against the DTL.
Net = ₹8,40,000 − ₹3,10,000 = ₹5,30,000, which is a net DTL.
The net DTL is shown under non-current liabilities.
The note shows the break-up: DTL on depreciation ₹8,40,000; DTA on expenses allowed on payment ₹3,10,000.

Answer: Show "Deferred tax liabilities (net)" of ₹5,30,000 under non-current liabilities, with the component break-up in the notes.

Example 2

Beta Ltd has a DTA of ₹2,00,000 and a DTL of ₹1,20,000 at the year end. Opening balances were a DTL of ₹50,000 and a DTA of nil. The company has no legal right to set off current tax assets against current tax liabilities. Explain the presentation and compute the deferred tax charge or credit for the year, assuming nothing was adjusted directly outside profit and loss.

Show the solution

The legal right to set off is absent, so the offsetting condition fails.
Show the DTA of ₹2,00,000 under non-current assets and the DTL of ₹1,20,000 under non-current liabilities, gross. No net figure appears on the face of the balance sheet.
The profit and loss effect is the total of the movements in each component. It does not depend on gross or net presentation.
DTL: opening ₹50,000, closing ₹1,20,000. Increase = ₹1,20,000 − ₹50,000 = ₹70,000. An increase in a liability is a deferred tax expense of ₹70,000.
DTA: opening nil, closing ₹2,00,000. Increase = ₹2,00,000. An increase in an asset is a deferred tax credit of ₹2,00,000.
Total movement = credit ₹2,00,000 − expense ₹70,000 = net credit ₹1,30,000.
Cross-check: opening net position was a net DTL of ₹50,000. Closing net position is ₹1,20,000 − ₹2,00,000 = net DTA of ₹80,000. The swing is ₹50,000 + ₹80,000 = ₹1,30,000, the same figure. This net comparison is only a check and is not presented.

Answer: Present the DTA of ₹2,00,000 and the DTL of ₹1,20,000 gross. The deferred tax credit for the year is ₹1,30,000 (DTA credit ₹2,00,000 less DTL expense ₹70,000), shown in the statement of profit and loss.

Exam tips

Write both offsetting conditions in every answer on netting. Examiners look for the pair.
Always say "separately from current assets and current liabilities" when asked about classification.
In numerical questions, show the gross DTA and DTL first, then the net, so you earn marks even if the offset conclusion is debated.
Link the year's charge to the change in balances, and show it as part of tax expense in the statement of profit and loss.
State the certainty test with the item: reasonable certainty for other DTA, virtual certainty for DTA on unabsorbed depreciation or carried forward losses.
For MCQs, scan for the words "current" and "automatically offset" as likely wrong options.

Practice questions from AS 22 Accounting for Taxes on Income

Presentation and Disclosure under AS 22 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Presentation and Disclosure under AS 22: frequently asked questions

Where is deferred tax shown in the balance sheet?

It is shown separately from current assets and current liabilities. Under Schedule III, a deferred tax liability is under non-current liabilities and a deferred tax asset is under non-current assets. The net caption is used only where the offset conditions are met. Otherwise they are shown gross.

When can DTA and DTL be offset under AS 22?

Only when both conditions are met. The enterprise must have a legally enforceable right to set off current tax assets against current tax liabilities, and the balances must relate to taxes on income levied by the same governing taxation law. If either fails, show them gross.

What must be disclosed about deferred tax in the notes?

Give the break-up of deferred tax assets and liabilities by major components, such as depreciation and carried forward losses. A DTA on other timing differences needs reasonable certainty, but a DTA on unabsorbed depreciation or carried forward losses needs virtual certainty backed by convincing evidence of future taxable income. For such a DTA, disclose its amount and the nature of that evidence.

Is the deferred tax charge the same as the balance sheet figure?

No. The balance sheet shows the cumulative closing balance. The charge or credit for the year is the change in the balances, taken to the statement of profit and loss, assuming no item is adjusted directly elsewhere.