Page 7 - 2. COMPILER QB - INDAS 12

Of the deferred tax asset balance, Rs. 28,000 related to a temporary difference. This deferred tax asset had

previously been recognised in OCI and accumulated in equity as a revaluation surplus.
The entity reviewed the carrying amount of the asset in accordance with para 56 of Ind AS 12 and

determined that it was probable that sufficient taxable profit to allow utilization of the deferred tax asset
would be available in the future.

Show the revised amount of Deferred tax asset & Deferred tax liability and present the necessary journal
entries.

SOLUTION

Calculation of Taxable temporary differences (using reverse working):
Deferred tax liability = 60,000

Existing tax rate = 40%

Deductible temporary differences = 60,000 / 40% = 1,50,000

Calculation of Deductible temporary differences (using reverse working):

Deferred tax asset = 80,000

Existing tax rate = 40%
Deductible temporary differences = 80,000/40% = 2,00,000

Of the total deferred tax asset balance of Rs. 80,000, 28,000 is recognized in OCI

Hence, Deferred tax asset balance of Profit & Loss is 80,000 - 28,000 = 52,000
Deductible temporary difference recognized in Profit & Loss is 1,30,000 (52,000 / 40%)

Deductible temporary difference recognized in OCI is 70,000 (28,000 / 40%)

The adjusted balances of the deferred tax accounts under the new tax rate are:
Deferred Tax Asset
Previously credited to OCI – Equity 70,000 x 0.45 31,500
Previously recognised income 1,30,000 x 0.45 58,500
90,000
Deferred Tax Liability
Previously recognised expense 1,50,000 x 0.45 67,500

The net adjustment to deferred tax expense is a reduction of 2,500. Of this amount 3,500 is recognised in OCl

and 1,000 is charged to P&L.
The amounts are calculated as follows:

Carrying Amt. Carrying Amt. Increase (decrease) in
at 45% at 40% DT Expense
Deferred Tax Assets
Previously credited to OCI – Equity 31,500 28,000 -3,500
Previously recognised income 58,500 52,000 -6,500
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