Skip to content

CA Final · Financial Reporting · Ind AS 12 Income Taxes

At 31 March 2026, Fusion Ltd has deferred tax assets of ₹8,00,000 and deferred tax liabilities of ₹12,00,000, all relating to the same taxable entity and the same taxation authority. Fusion has a legally enforceable right to set off current tax assets against current tax liabilities and intends to settle current taxes on a net basis. How should these be presented in the balance sheet?

Fusion Ltd should present a net deferred tax liability of ₹4,00,000. The offset conditions are met: a legally enforceable right to set off current tax balances, the same taxable entity, and the same taxation authority. The ₹8,00,000 asset is therefore netted against the ₹12,00,000 liability.

  1. ADeferred tax liability ₹12,00,000 and deferred tax asset ₹8,00,000, shown separately
  2. BNet deferred tax liability of ₹4,00,000Correct
  3. CNet deferred tax asset of ₹4,00,000
  4. DDeferred tax liability ₹12,00,000 only, with the asset ignored until realised

Explanation

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets and liabilities and they relate to income taxes levied by the same authority on the same taxable entity. Net is 12,00,000 - 8,00,000 = 4,00,000 liability. Gross presentation is wrong as the offset conditions are met.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 12 Income Taxes shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 12 Income TaxesFree diagnostic mock

More Ind AS 12 Income Taxes questions