Financial Accounting · Accounting for Taxes on Income (AS 22)

AS 22 Review, Presentation and Disclosure Requirements

Updated 10 October 2026 · Fact-checked

Under AS 22, you review deferred tax assets at every balance sheet date and write them down if future taxable income is no longer reasonably or virtually certain. You offset only if legal right and same-law conditions are met, show deferred tax separately from current items, and disclose components and evidence.

Understand Review, Presentation and Disclosure under AS 22

Recognising deferred tax is only half of AS 22. The standard also asks you to keep checking what you recognised, show it clearly, and explain it in the notes.

Review. A deferred tax asset is only worth carrying if you can use it against future taxable income. So at each balance sheet date you review its carrying amount. If it is no longer reasonably certain (or virtually certain, where the standard requires that stronger level, such as for carry forward losses and unabsorbed depreciation) that enough future taxable income will be available, you write the asset down. If conditions improve, you can reverse that write-down to the extent certainty returns.

Re-assessment of unrecognised assets. The same logic works the other way. At each balance sheet date you re-assess deferred tax assets you did not recognise earlier. If it has now become reasonably or virtually certain, as the case may be, that future taxable income will be sufficient, you recognise them. An improvement in trading conditions is the standard's own example.

Presentation. Deferred tax assets and liabilities must be distinguished from current tax assets and liabilities. They go under a separate heading in the balance sheet, apart from current assets and current liabilities. Deferred tax assets and deferred tax liabilities are offset only when both conditions are met: a legally enforceable right to set off current tax assets against current tax liabilities, and both relate to taxes on income levied by the same governing taxation laws. Current tax assets and liabilities are offset only if there is a legal right to set off and the enterprise intends to settle on a net basis.

Disclosure. The notes must give the break-up of deferred tax assets and liabilities into major components. If the enterprise has unabsorbed depreciation or carry forward of losses under tax laws, it must disclose the nature of the evidence supporting recognition of the deferred tax asset. Following the 2026 amendment, an enterprise also discloses that it has applied the exception for deferred tax related to Pillar Two income taxes.

Key rules to remember

Review of deferred tax assets: Write down DTA to the extent it is no longer reasonably / virtually certain that sufficient future taxable income will be available; Done at each balance sheet date (para 26). The write-down can be reversed if certainty returns.
Re-assessment of unrecognised DTA: Recognise earlier unrecognised DTA to the extent it has become reasonably / virtually certain that taxable income will be available; Done at each balance sheet date (para 19).
Offsetting deferred tax: Offset DTA and DTL only if (a) legal right to set off current tax assets against current tax liabilities AND (b) both relate to taxes on income levied by the same governing taxation laws; Both conditions must hold (para 29).
Offsetting current tax: Offset current tax assets and liabilities if (a) legally enforceable right to set off AND (b) intention to settle net; Para 27.
Presentation: Deferred tax shown under a separate heading, apart from current assets and current liabilities; Para 30. For non-company entities, net DTA may be shown after 'Investments' and net DTL after 'Unsecured Loans'.
Disclosures: Break-up into major components (para 31); nature of evidence if unabsorbed depreciation or carry forward losses (para 32); Pillar Two exception disclosure (para 32A); Notes to accounts.

How to solve Review, Presentation and Disclosure under AS 22 questions

Use this method for any question on review, presentation or disclosure under AS 22.

1Identify the balance sheet date and list the opening deferred tax assets and liabilities with their components.
2For each deferred tax asset, ask whether sufficient future taxable income is reasonably certain, or virtually certain where there are carry forward losses or unabsorbed depreciation.
3If certainty has gone, write down the asset and charge the write-down to profit and loss. If it has returned, reverse an earlier write-down or recognise a previously unrecognised asset, to the extent of certainty.
4Check offsetting: legal right to set off current tax and same taxation law. If both hold, show the net figure; otherwise show gross.
5Present deferred tax under a separate heading, not within current assets or current liabilities.
6Write the notes: components of DTA and DTL, and the nature of evidence if losses or unabsorbed depreciation support a DTA.
7State the conclusion in one line, with the net balance and whether it is an asset or liability.

Quickest way: Two-test shortcut for offsetting and review

When to use it: Short-answer or MCQ questions asking whether to write down, recognise or offset.

Review question: ask only 'Is future taxable income still certain enough?' No means write down, yes after earlier doubt means reverse or recognise.
Offset question: check two tests, legal right to set off and same tax law. Any failure means no offset.
Presentation question: answer 'separate heading, not current'.
Disclosure question: recall three items: components, evidence for loss-based DTA, Pillar Two exception.

Common mistakes in Review, Presentation and Disclosure under AS 22

Reviewing deferred tax assets only when they arise
Students link the test of certainty only to initial recognition.
Fix: State that the review is at each balance sheet date, and that earlier write-downs can be reversed.
Offsetting a DTA against a DTL without checking conditions
Students assume netting is automatic.
Fix: Check both tests: legal right to set off current tax, and taxes levied by the same governing taxation laws.
Showing deferred tax under current assets or current liabilities
It looks like a tax balance, so it is placed with current tax.
Fix: Show it under a separate heading, distinguished from current tax and from current items.
Skipping the evidence disclosure for loss-based DTA
Students remember components but forget the paragraph on unabsorbed depreciation and carry forward losses.
Fix: Whenever a question mentions unabsorbed depreciation or losses, add a note on the nature of evidence supporting recognition.
Confusing offsetting of current tax with offsetting of deferred tax
Both use 'legal right to set off', but the conditions differ.
Fix: Current tax needs a legal right plus intention to settle net. Deferred tax needs a legal right over current tax plus same taxation laws.

Worked examples

Example 1

Alpha Ltd had a deferred tax asset of ₹6,00,000 on carry forward business loss at 31 March 2026. At 31 March 2027, due to loss of a major customer, it is no longer virtually certain that sufficient taxable income will arise, except to the extent of ₹2,50,000 of the asset. Show the treatment, and the position if next year certainty returns for ₹1,50,000 more.

Show the solution

Opening DTA carried: ₹6,00,000.
At 31 March 2027, only ₹2,50,000 remains supported by virtually certain future taxable income.
Write-down = ₹6,00,000 − ₹2,50,000 = ₹3,50,000.
Entry: Profit and Loss A/c Dr ₹3,50,000 to Deferred Tax Asset A/c ₹3,50,000.
Carrying amount after review = ₹2,50,000.
Next year, certainty returns for ₹1,50,000. The write-down is reversed to that extent.
Entry: Deferred Tax Asset A/c Dr ₹1,50,000 to Profit and Loss A/c ₹1,50,000.
Carrying amount = ₹2,50,000 + ₹1,50,000 = ₹4,00,000.
Disclose the nature of the evidence supporting recognition, as the asset arises from carry forward losses.

Answer: Write-down of ₹3,50,000 in 2026-27 leaving ₹2,50,000; reversal of ₹1,50,000 next year giving ₹4,00,000, with evidence disclosed.

Example 2

Beta Ltd has the following at 31 March 2027: DTA on provision for doubtful debts ₹1,20,000; DTL on depreciation ₹4,50,000. Both relate to income tax levied by the same law, and Beta has a legally enforceable right to set off current tax assets against current tax liabilities. Show the presentation and the required note.

Show the solution

Check offsetting: legal right to set off current tax is present, and both relate to taxes on income under the same law.
Both conditions are met, so offset is required.
Net = DTL ₹4,50,000 − DTA ₹1,20,000 = ₹3,30,000 net deferred tax liability.
Present ₹3,30,000 as deferred tax liability (net) under a separate heading in the balance sheet, not within current liabilities.
Notes to accounts: break up into major components, namely DTL on depreciation ₹4,50,000 and DTA on provision for doubtful debts ₹1,20,000, net DTL ₹3,30,000.

Answer: Net deferred tax liability of ₹3,30,000 shown under a separate heading, with components disclosed in the notes.

Exam tips

MCQs often test the two conditions for offsetting deferred tax. Learn them word for word and check that both are present.
In written answers, name the paragraph content: review, re-assessment, presentation, disclosure. Headings earn step marks.
In numerical questions, show the write-down or reversal entry with the profit and loss effect, then the closing carrying amount.
Whenever losses or unabsorbed depreciation appear, mention the evidence disclosure. It is an easy mark many students miss.

Practice questions from Accounting for Taxes on Income (AS 22)

Review, 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.

Review, Presentation and Disclosure under AS 22: frequently asked questions

How often must deferred tax assets be reviewed under AS 22?

At each balance sheet date. You write down the carrying amount if sufficient future taxable income is no longer reasonably or virtually certain. The write-down can be reversed later to the extent certainty returns.

When can deferred tax assets and liabilities be offset?

Only when the enterprise has a legally enforceable right to set off assets against liabilities representing current tax, and the deferred tax balances relate to taxes on income levied by the same governing taxation laws.

Where is deferred tax shown in the balance sheet?

Under a separate heading, distinguished from current tax and kept apart from current assets and current liabilities. For non-company entities, a net DTA may be shown after 'Investments' and a net DTL after 'Unsecured Loans'.

What must be disclosed in the notes about deferred tax?

The break-up of deferred tax assets and liabilities into major components. If there are unabsorbed depreciation or carry forward losses, also disclose the nature of evidence supporting the DTA. The Pillar Two exception must be disclosed where applied.