Post by subapil on Sept 24, 2013 10:44:30 GMT 5.75
Suppose, an entity has created provision for loss on investment/ deposits on problematic institutions. As provision is not allowed for tax purpose, there is difference between carrying amount of liability in the form of provision for loss and tax base. Does the provision for loss on investment qualify as deductible temporary difference? Since, such provision is not certain regards to deduction for tax purpose.
One argument is here that certainly, there is temporary difference at some points and the same would be reversed in the financial statements due to recovery of investment or deposits on such problematic institutions. At the point where all such deposits are recovered, no difference remains anymore. So, the question is here do we need to recognize deferred tax income (assets) for such adjustments which is solely made in the financial statements and no impact on tax calculation (as no amount would be deducted in the later years out of such provision).
One argument is here that certainly, there is temporary difference at some points and the same would be reversed in the financial statements due to recovery of investment or deposits on such problematic institutions. At the point where all such deposits are recovered, no difference remains anymore. So, the question is here do we need to recognize deferred tax income (assets) for such adjustments which is solely made in the financial statements and no impact on tax calculation (as no amount would be deducted in the later years out of such provision).