Deferred tax liability for loss making company
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Al-Mahamud
- Posts: 30
- Joined: 10 Feb 2021, 07:37
Deferred tax liability for loss making company
Should we recognize deferred tax liability for a newly incorporated company having continuous loss and not having any possibility of making profit within next five years?
Re: Deferred tax liability for loss making company
I think no, you should not
Re: Deferred tax liability for loss making company
A deferred tax "liability" should usually be recognized by a loss-making entity, shouldn't it? It's quite possible though that such a DTL is offset against a DTA for unused loss carryforwards.
Re: Deferred tax liability for loss making company
You do recognise DTL even without tax profits on the horizon. Note that the sufficient taxable profits criteron in IAS 12 applies to DTA only. But as you wrote, existence of DTL allows you to recognise DTA to the extent of existing DTL, but make sure that this makes sense in terms of timing of reversal of those differences. E.g. don't recognise DTA for a carryforward tax loss to the extent of DTL if this tax loss will expire before DTL reverse
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Al-Mahamud
- Posts: 30
- Joined: 10 Feb 2021, 07:37
Re: Deferred tax liability for loss making company
How does your DTL arise Al-Mahamad?
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Al-Mahamud
- Posts: 30
- Joined: 10 Feb 2021, 07:37
Re: Deferred tax liability for loss making company
Due to temporary difference arising from PPE & Intangible asset.
Re: Deferred tax liability for loss making company
ok cool. hope they are not impaired then
Re: Deferred tax liability for loss making company
you mean impaired due to temporary differences?