CMA Intermediate · Financial Accounting · Accounting for Taxes on Income (AS 22)
Under AS 22, the tax effects of timing differences are included in the tax expense in the statement of profit and loss. Where do they appear in the balance sheet?
They appear as deferred tax assets, subject to the consideration of prudence, or as deferred tax liabilities in the balance sheet, while the tax effect is also included in the tax expense in the statement of profit and loss.
- AAs deferred tax assets (subject to prudence) or as deferred tax liabilitiesCorrect
- BOnly as current liabilities under provisions
- COnly as reserves and surplus
- DThey are not shown in the balance sheet
Explanation
The text of AS 22 states that tax effects of timing differences are included in tax expense in the statement of profit and loss and as deferred tax assets, subject to prudence, or deferred tax liabilities in the balance sheet. The other options contradict this recognition requirement.
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