Page 5 - 2. COMPILER QB - INDAS 12

(ii) The provision creates a potential deferred tax asset for the group since its carrying value is Rs20,00,000
and its tax base is nil.

This deferred tax asset can be recognised because X Ltd. is expected to generate taxable profits in
excess of Rs. 20,00,000 in the year to 31st March, 2019.

The amount of the deferred tax asset will be Rs. 4,00,000 (Rs. 20,00,000 x 20%).

This asset will be presented as a deduction from the deferred tax liabilities caused by the (larger)
taxable temporary differences.

(iii) The development costs (is treated as an Intangible Asset & will be depreciated over 5 years in books of

accounts) have a carrying value of Rs. 15,20,000 [Rs. 16,00,000 – (Rs. 16,00,000 x 1/5 x 3/12)].
The tax base of the development costs is nil since the relevant tax deduction has already been claimed.
The deferred tax liability will be Rs. 3,04,000 (Rs. 15,20,000 x 20%). All deferred tax liabilities are
shown as non-current.

(iv) The carrying value of the loan at 31st March, 2018 is Rs. 1,07,80,000 (Rs. 1,00,00,000 – Rs. 2,00,000 +

(Rs. 98,00,000 x 10%)). - refer amortization table
The tax base of the loan is Rs. 1,00,00,000. (expense of Rs. 2,00,000 will be allowed separately)
This creates a deductible temporary difference of Rs. 7,80,000 (Rs. 1,07,80,000 – Rs. 1,00,00,000) and a
potential deferred tax asset of Rs. 1,56,000 (Rs. 7,80,000 x 20%). Due to the availability of taxable
profits next year (see part (ii) above), this asset can be recognised as a deduction from deferred tax

liabilities.
Amortization Table for verification of effective rate of interest
Year Opening balance (Rs) Interest @ 10% Closing balance
(A) (Rs) (B) (Rs) (A) + (B)

1 (1,00,00,000 – 2,00,000) = 9,80,000 1,07,80,000
98,00,000
2 1,07,80,000 10,78,000 1,18,58,000
3 1,18,58,000 11,85,800 1,30,43,800

Q3 (May19) - Similar to Q2

PQR Ltd., a manufacturing company, prepares consolidated financial statements to 31st March each year.
During the year ended 31st March, 2018, the following events affected the tax position of the group:

● QPR Ltd., a wholly owned subsidiary of PQR Ltd., incurred a loss adjusted for tax purposes of Rs
30,00,000. QPR Ltd. is unable to utilize this loss against previous tax liabilities. The Income-tax Act does

not allow QPR Ltd. to transfer the tax loss to other group companies. However, it allows QPR Ltd. to carry

the loss forward and utilize it against the company's future taxable profits. The directors of PQR Ltd. do
not consider that QPR Ltd. will make taxable profits in the foreseeable future.
● During the year ended 31st March, 2018, PQR Ltd. capitalized development costs which satisfied the

criteria as per Ind AS 38 ‘Intangible Assets’. The total amount capitalized was Rs 16,00,000. The
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