Page 2 - 22. COMPILER QB - INDAS 34

INDAS – 34
INTERIM FINANCIAL REPORTING

(TOTAL NO. OF QUESTIONS – 9)

INDEX

S.No. Particulars Page No.

1 RTP Questions 22.1
2 MTP Questions 22.4

3 Past Exam Questions 22.6

RTPs QUESTIONS

Q1 (Nov. 19)

An entity reports quarterly, earns 1,50,000 pre-tax profit in the first quarter but expects to incur losses of Rs
50,000 in each of the three remaining quarters. The entity operates in a jurisdiction in which its estimated

average annual income tax rate is30%.
The management believes that since the entity has zero income for the year, its income-tax expense for the

year will be zero. State whether the management‖s views are correct. If not, then calculate the tax expense
for each quarter as well as for the year as per Ind AS 34.

SOLUTION

As per Ind AS 34 ―Interim Financial Reporting‖, income tax expense is recognised in each interim period

based on the best estimate of the weighted average annual income tax rate expected for the full financial
year.

Accordingly, the management‖s contention that since the net income for the year will be zero no income tax
expense shall be charged quarterly in the interim financial report, is not correct.

The following table shows the correct income tax expense to be reported each quarter in accordance with Ind
AS 34:

Period Pre-tax earnings Effective tax Tax expense
(in Rs) rate (in Rs)
First Quarter 1,50,000 30% 45,000

Second Quarter (50,000) 30% (15,000)
Third Quarter (50,000) 30% (15,000)

Fourth Quarter (50,000) 30% (15,000)
Annual 0 0

22.1