Treatment of Deferred Tax Under Ind AS 12 for Intended Sale of PPE (Part-1)

Ind AS 12, Income taxes, prescribes the accounting treatment for income taxes. The principal issue in accounting for income taxes is how to account for the current and future tax consequences of:

(a) the future recovery (settlement) of the carrying amount of assets (liabilities) that are recognised in an entity’s balance sheet; and

(b) transactions and other events of the current period that are recognised in an entity’s financial statements.

In this story, we have covered the measurement of the accounting base, tax base, and differences that arose in respect of these two that are required to determine the deferred tax under multiple cases. Usually entity expects to recover the cost or the carrying amount of a PPE by using the item, but what will be the tax consequence where the intention has changed instead of using the PPE to selling the PPE and recovers the amount immediately from the proceeds instead of using it over a period.

This story deals with various cases explaining the treatment of deferred tax under Ind AS 12 for the intended sale of PPE either individually or as slump sale, directly selling after reclassifying as investment property or in slump sale.

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