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CMA Final · Corporate Financial Reporting · Income Taxes (Ind AS 12)

Kaveri Ltd has an asset with carrying amount Rs 8,00,000 and tax base Rs 5,00,000 at year end. The enacted tax rate is 25%. The opening deferred tax liability on this asset was Rs 40,000. What deferred tax expense is recognised in profit or loss for the year, assuming no OCI item?

The closing deferred tax liability is 25% of the Rs 3,00,000 temporary difference, which is Rs 75,000. Deducting the opening liability of Rs 40,000 gives a deferred tax expense of Rs 35,000 for the year.

  1. ARs 35,000Correct
  2. BRs 75,000
  3. CRs 40,000
  4. DRs 1,15,000

Explanation

Taxable temporary difference = 8,00,000 - 5,00,000 = 3,00,000. Closing DTL = 25% x 3,00,000 = 75,000. Expense = 75,000 - 40,000 = 35,000. Charging the full 75,000 ignores the opening balance.

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