Question

Why must we account for deferred tax in financial statements? (as per IFRS)

Answer 1

The revenue authorities do not accept the tax on income disclosed in financial statement prepared as per accounting rules. They have provided different set of rules to calculate the income and require organization to pay tax on such income. Which creates the difference between accounting income and taxable income. Which arises the need to record deferred tax.

Element to perceive a deferred tax liability or (subject to determined conditions) a deferred tax asset for every single brief distinction, with a few special cases. Impermanent contrasts are contrasts between the tax base of an asset or liability and its conveying sum in the announcement of money related position. The tax base of an asset or liability is the sum credited to that asset or liability for tax purposes.

A deferred tax liability emerges if a substance will settle government obligation on the off chance that it recoups the conveying measure of another asset or liability. A deferred tax asset emerges if a substance:

will make good on less government expense in the event that it recoups the conveying measure of another asset or liability; or

has unused tax misfortunes or unused tax credits