Income Tax: ICAI issues exposure draft of revised Accounting Standard – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/money-and-banking/income-taxes-icai-issues-exposure-draft-of-revised-accounting-standard/article34586805.ece?homepage=true

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The CA Institute has come up with an exposure draft for a revised accounting standard on income taxes, to be applicable on entities that are not required to adopt the Indian Accounting Standards (Ind AS) notified by the Corporate Affairs Ministry.

The latest move follows the decision of the various standard setting forums – the Accounting Standards Board (ASB) of ICAI, the NFRA and the Ministry of Corporate Affairs (MCA) – to revise accounting standards.

‘Underlying principles’

“Accordingly, the ASB of ICAI has embarked on the process of upgradation of these standards which will be applicable to the entities to whom the Ind AS are not applicable,” sources said. The objective behind the revision is to ensure that underlying principles are not too different between the Ind AS entities and the other entities.

The exposure draft on Accounting Standard for Income Taxes (AS 12) is the latest among the several standards that are proposed to be revised. The entire set of revised standards are expected to be implemented at one go in a future date and the timeline for this is not yet decided. June 10 is the last date to send comments on the exposure draft. The CA Institute has specified June 10 as the last date by when comments can be sent on the exposure draft.

“For the accounting standard on income taxes, there will not be much change. Whatever standard one is following, almost the same position will continue for entities that are not adopting Ind AS,” sources said.

The proposed revision, which will impinge on public sector banks, certain insurance companies and entities that function as partnerships, will not fully align itself to the Ind AS 12 as the guidance given to ASB by the Central council is not to change the position of existing accounting standard on income taxes (AS 22) to that of Ind AS 12.

One of the main change in the revised accounting standard on income taxes, as against the existing AS 22, will be on the aspect of recognition of deferred taxes. Earlier, when there was unabsorbed depreciation or carry forward losses, there was a question whether deferred taxes should be recognised and will there be future profit to realise the deferred taxes.

“Now although the outcome would be the same, the language has been aligned to Ind AS 12 wherein one has to see the probability of getting profits in the future, reasonable certainty and there is also guidance to determine whether the entity would have profits to realise the deferred tax assets,” sources added.

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