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

Lakshya Ltd has deductible temporary differences of Rs 6,00,000 and tax rate 30%. Taxable temporary differences reversing in the same periods and same tax authority total Rs 2,00,000. Management estimates future taxable profits, before reversal of these differences, of Rs 1,00,000 more, which are probable. What deferred tax asset can be recognised?

A deferred tax asset is recognised only to the extent taxable profit is probable. Available profit is Rs 2,00,000 of reversing taxable differences plus Rs 1,00,000 of future profit, totalling Rs 3,00,000. At 30% the recognisable asset is Rs 90,000.

  1. ARs 90,000Correct
  2. BRs 1,80,000
  3. CRs 60,000
  4. DRs 30,000

Explanation

Deferred tax asset is recognised to the extent taxable profit will be available. Available: 2,00,000 reversing taxable differences + 1,00,000 future profit = 3,00,000. DTA = 30% x 3,00,000 = 90,000. Recognising all 6,00,000 gives 1,80,000, which exceeds probable profit.

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