Introduction to IND AS 12 IND AS 12, also known as Accounting for Income Taxes, is a standard issued by the Institute of Chartered Accountants of India (ICAI) that prescribes the principles and methods for accounting for income taxes. This standard applies to all entities that are required to prepare financial statements in accordance with Indian Accounting Standards (IND AS).

1. Understanding IND AS 12 – Accounting for Income Taxes

2. Introduction to IND AS 12 IND AS 12, also known as Accounting for Income Taxes, is a standard issued by the Institute of Chartered
Accountants of India (ICAI) that prescribes the principles and methods for accounting for income taxes. This standard appliesto all
entities that are required to prepare financial statements in accordance with Indian Accounting Standards (IND AS). The purpose of IND
AS 12 is to ensure that an entity’s financial statements reflect the current and future tax consequences of its transactionsand events.
Why is IND AS 12 important? IND AS 12 is important because it provides a framework for accounting for income taxes in a way that
reflects the current and future tax consequences of an entity’s transactions and events. This helps to ensure that the financial
statements of a company accurately reflect its financial position and performance. By requiring companies to recognize deferred tax
assets and liabilities for temporary differences between tax bases and carrying amounts of assets and liabilities, IND AS 12helps to
provide a more accurate picture of a company’s financial performance and position. This standard also requires companies to consider
the future tax consequences of events that have been recognized in their financial statements, which helps to provide a moreforward-
looking view of a company’s financial health.
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3. Moreover, IND AS 12 is important for investors and other stakeholders because it helps to ensure that financial statements are
comparable across companies and industries, and that companies are following consistent accounting principles when it
comes to income taxes. This allows investors to make informed decisions about their investments, and helps to promote
transparency and accountability in financial reporting. Ads by
How does IND AS 12 work? IND AS 12 requires companies to recognize deferred tax assets and liabilities for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.
Temporary differences arise when the tax base of an asset or liability is different from its carrying amount for financial
reporting purposes. IND AS 12 also requires companies to consider the future tax consequences of events that have been
recognized in their financial statements. This includes future tax consequences of unused tax losses and credits, as well as
the impact of changes in tax rates on deferred tax assets and liabilities. Key considerations under IND AS 12 Under IND AS
12, there are several key considerations that companies must take into account when accounting for income taxes. These
include: Temporary differences: Companies must recognize deferred tax assets and liabilities for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Temporary
differences arise when the tax base of an asset or liability is different from its carrying amount for financial reporting
purposes. Future tax consequences: Companies must consider the future tax consequences of events that have been
recognized in their financial statements. This includes future tax consequences of unused tax losses and credits, as well as
the impact of changes in tax rates on deferred tax assets and liabilities. Unused tax losses and credits: Companies must
consider the potential tax benefits of unused tax losses and credits when accounting for income taxes. Changes in tax rates:
Companies must consider the impact of changes in tax rates on their deferred tax assets and liabilities. This requires
companies to regularly review and update their deferred tax balances to reflect changes in tax rates. Judgement and
estimation: IND AS 12 requires judgement and estimation when determining the carrying amount of deferred tax assets and
liabilities, as well as the related valuation allowance. Companies must use their best judgement and available information to
make these estimates. Overall, these key considerations under IND AS 12 are important for ensuring that companies
accurately account for income taxes and provide a true and fair view of their financial performance and position.

4. Disclose required as per IND as 12 Under IND AS 12, companies are required to disclose information related to income taxes in their financial
statements. The disclosure requirements include: Current tax assets and liabilities: Companies must disclose the amount of current tax
assets and liabilities recognized in their balance sheet, as well as the amount of any unrecognized tax assets. Deferred taxassets and
liabilities: Companies must disclose the amount of deferred tax assets and liabilities recognized in their balance sheet, aswell as the
amount of any unrecognized deferred tax assets. Reconciliation of tax rates: Companies must disclose a reconciliation of theeffective
tax rate to the applicable tax rate, as well as an explanation of any material differences between the two rates. Unrecognized tax
benefits: Companies must disclose the amount of unrecognized tax benefits and explain the nature of the uncertainties that exist.
Unused tax losses and credits: Companies must disclose the amount of unused tax losses and credits, as well as any expirationdates or
limitations on their use. Significant judgement and estimation: Companies must disclose any significant judgement and estimation
involved in the measurement of deferred tax assets and liabilities, as well as the related valuation allowance. Changes in tax rates:
Companies must disclose the impact of changes in tax rates on their deferred tax assets and liabilities. Transactions and events:
Companies must disclose the impact of transactions and events on their income tax expense, including the impact of changes intax laws
or rates. Overall, these disclosure requirements are important for providing transparency and clarity around a company’s income tax
accounting and for ensuring that investors have the information they need to make informed decisions about their investments.

5. Conclusion IND AS 12 is an important standard that helps companies to accurately account for income taxes in their financial statements. It requires
companies to consider the future tax consequences of their transactions and events, and to recognize deferred tax assets and liabilities for
temporary differences between tax bases and carrying amounts of assets and liabilities. By following the principles and methods prescribed by IND
AS 12, companies can ensure that their financial statements provide a true and fair view of their financial performance and position. *****
Disclaimer: This article provides general information existing at the time of preparation and author takes no responsibility to update it with the
subsequent changes in the law. The article is intended as a news update and author neither assumes nor accepts any responsibility for any loss
arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice
be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement.
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