Skip to content

CA Intermediate · Advanced Accounting · AS 25 Interim Financial Reporting

Sundaram Auto Ltd (financial year April-March) estimates its annual profit before tax at ₹2,40,00,000 and an average annual effective tax rate of 25% on this. Its profit before tax for the quarter ended 30 June was ₹50,00,000. Under AS 25, what tax expense should be recognised for this quarter?

The tax expense for the quarter is ₹12,50,000. AS 25 requires interim tax to be computed by applying the estimated average annual effective tax rate, here 25%, to the interim period's pre-tax profit of ₹50,00,000, rather than using the annual tax figure.

  1. A₹12,50,000Correct
  2. B₹15,00,000
  3. C₹10,00,000
  4. D₹60,00,000

Explanation

AS 25 requires income tax expense in interim periods to be accrued using the estimated average annual effective tax rate applied to interim pre-tax income. Tax = 25% × ₹50,00,000 = ₹12,50,000. Applying the rate to annual profit (₹60,00,000) gives the annual tax, not the quarter's tax.

Did you get it right without looking?

One question tells you little. A timed set on AS 25 Interim Financial Reporting shows your real accuracy, how long you take and where you lose marks.

Practise AS 25 Interim Financial ReportingFree diagnostic mock

More AS 25 Interim Financial Reporting questions