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(charged to P&L) (charged to OCI) #

F. Journal Entry DTA Dr. 0.15 crores OCI Dr. 1.40 crores
To P&L 0.15 crores To DTL 1.40 crores

Therefore, Net DTL for the year = 1.25 crores (1.4 - 0.15).

* The difference of 24.25 crores is the net change due to 2 reasons - 1. depreciation and 2. revaluation.
For the difference due to depreciation of (0.75 crores), we have already made DTA (before revaluation

working). Hence, the remaining balance is leading to a taxable difference of 25 crores, on which DTL is
created = 5 crores.

# DTA / DTL are balance sheet items and hence cumulative numbers are shown in the balance sheet. Out of

the total DTL of 5 crores, we had already created DTL of 3.6 crores in 2016. Therefore additional charge
during the year is 1.4 crores.

Q9 (April 19 – 8 Marks)

B Limited is a newly incorporated entity. Its first financial period ends on March 31, 20X1. As on the said

date, the following temporary differences exist:

(a) Taxable temporary differences relating to accelerated depreciation of Rs. 9,000. These are expected to
reverse equally over the next 3 years.
(b) Deductible temporary differences of Rs. 4,000 expected to reverse equally over next 4 years.

It is expected that B Limited will continue to make losses for the next 5 years. Tax rate is 30%. Losses can

be carried forward but not backwards.
Discuss the treatment of deferred tax as on March 31, 20X1.

SOLUTION

The year-wise anticipated reversal of temporary differences is as under:
Particulars Year ending Year ending Year ending Year ending

on March on March 31, on March on March
31, 20X2 20X3 31, 20X4 31, 20X5
Reversal of taxable temporary difference relating to

accelerated depreciation over next 3 years (Rs. 3,000 3,000 3,000 Nil
9,000/3)

Reversal of deductible temporary difference relating

to preliminary expenses over next 4 years (Rs. 1,000 1,000 1,000 1,000
4,000/4)

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