[Checklist] Disclosure Obligations under AS 22 | Accounting for Taxes on Income

The objective of AS 22, Accounting for Taxes on Income, is to prescribe the accounting treatment for taxes on income. Taxes on income is one of the significant items in the statement of profit and loss of an enterprise. In accordance with the matching concept, taxes on income are accrued in the same period as the revenue and expenses to which they relate. Matching such taxes against revenue for a period poses special problems arising from the fact that in a number of cases, taxable income may be significantly different from the accounting income. This divergence between taxable income and accounting income arises due to two main reasons. Firstly, there are differences between items of revenue and expenses as appearing in the statement of profit and loss and the items which are considered as revenue, expenses or deductions for tax purposes. Secondly, there are differences between the amount in respect of a particular item of revenue or expense as recognised in the statement of profit and loss and the corresponding amount which is recognised for the computation of taxable income. As per the requirements of this standard, an enterprise must comply with the below-mentioned disclosure obligations:

I. Has the entity disclosed the break-up of deferred tax assets and deferred tax liabilities into major components of the respective balances in the notes to accounts.

II. Whether an entity has offset the deferred assets and deferred liabilities in the balance sheet when the entity has a legally enforceable right to set off current tax assets and current tax liabilities & deferred tax assets and deferred tax liabilities related to taxes on income levied by the same governing taxation laws.

III. Whether an entity has offset current tax assets and current tax liabilities in the balance sheet when the entity has a legally enforceable right to set off current tax assets and current tax liabilities and intends to settle those assets and liabilities on a net basis.

IV. If MAT credit is recognised as an asset (subject to considerations of prudence), whether the same has been presented under the head Loans and Advances as MAT credit entitlement.

V. Has the Minimum Alternative Tax been disclosed as the current tax in the profit and loss account.

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