AS 22- Treatment of deferred tax assets (DTA) and deferred tax liabilities (DTL) for computation of capital – RBI clarifies
In terms of Accounting Standard 22 issued by the Institute of Chartered Accountant of India (ICAI), on ‘Accounting for Taxes on Income', taxable income is calculated in accordance with tax laws and the requirements of these laws to compute taxable income differ from the accounting policies applied to determine accounting income.
The tax effects of timing differences are included in the tax expense in the statement of profit and loss and as deferred tax assets (DTA) (subject to the consideration of prudence) or as deferred tax liabilities (DTL) in the balance sheet.
As creation of DTA or DTL would give rise to certain issues impacting the balance sheet of the company, RBI clarifies that the regulatory treatment to be given to these issues are as under :-
1. The balance in DTL account will not be eligible for inclusion in Tier I or Tier II capital for capital adequacy purpose as it is not an eligible item of capital.
2. DTA will be treated as an intangible asset and should be deducted from Tier I Capital.
DNBS (PD) C.C. No. 124/ 03.05.002/ 2008-09 Dated 31 July, 2008