Following is the summarised statement of profit and loss of NM Limited as per Ind AS for the year ended 31st March 20X2: Particulars in crore…

CA Final · Financial Reporting · MTP · November 2026
Following is the summarised statement of profit and loss of NM Limited as per Ind AS for the year ended 31st March 20X2: Particulars in crore Revenue from operations 580.00 Other income 28.00 (A) Total income 608.00 Purchases of stock-in-trade 20.00 Changes in inventories of stock-in-trade 3.00 Employee benefits expense 58.00 Finance costs 65.00 Depreciation and amortization expense 15.00 Other expenses 150.00 (B) Total expenses 311.00 (C) Profit before tax (A-B) 297.00 Current tax 82.70 Deferred tax 0.75 (D) Tax expense 83.45 (E) Profit after tax [C-D] 213.55 Additional information: Corporate income tax rate applicable to NM Limited is 30%. Other income includes long-term capital gains of ₹ 5 crore which are taxable at the rate of 10%. Other expenses include the following items which are not deductible for income tax purposes: Item in crore Penalties 0.50 Impairment of goodwill 22.00 Corporate Social Responsibility expense 3.00 Other expenses include research and development (R & D) expenditure of ₹ 4 crore in respect of which a 200% weighted deduction is available under income tax laws. Other income includes dividends of ₹ 2 crore, which is exempt from tax. Profit before tax of ₹ 297 crore includes (i) agriculture income of ₹ 25 crore which is exempt from tax; and (ii) profit of ₹ 30 crore earned in the USA on which NM Limited has paid tax at the rate of 20%. Depreciation as per income tax laws is ₹ 12.5 crore. During review of the financial statements of NM Limited, the CFO multiplied profit before tax by the income tax rate and arrived at ₹ 89.10 crore as the tax expense (₹ 297 crore x 30% = ₹ 89.10 crore). However, actual income tax expense appearing in the summarized statement of profit and loss is ₹ 83.45 crore. The CFO has sought your help in reconciling the difference between the two tax expense amounts. Prepare a reconciliation containing the disclosure as required under the relevant Ind AS.

Suggested Answer and Working Notes:

Reconciliation of income tax expense and current tax as per accounting profit for the year ended 31st March, 20X2 Particulars in crore Accounting profit 297.00 Tax at the applicable tax rate of 30% 89.10 Tax effect of expenses that are not deductible in determining taxable profits: Penalties (0.50 x 30%) 0.15 Impairment of goodwill (22.00 x 30%) 6.60 Corporate social responsibility expense (3.00 x 30%) 0.90 7.65 Tax effect of expenses that are deductible in determining taxable profits: Research and development expenses (4.00 x 30%) (1.20) Tax effect of income that are exempted in determining taxable profits: Dividend income (Exempt) (2.00 x 30%) 0.60 Agriculture income (Exempt) (25.00 x 30%) 7.50 (8.10) Tax effect of income on which different tax rates are used for determining taxable profits: Differential income tax on long term capital gain (5.00 x 20%) 1.00 Foreign income in USA (30.00 x 10%) 3.00 (4.00) Income tax expense (Current) reported in the Statement of Profit and Loss for the current year 83.45 Reconciliation of deferred tax: Particulars in crore Deferred tax in relation to depreciation and amortization on property, plant and equipment and intangible assets [(15-12.5) x 30%] 0.75 Tax expense (deferred) reported in the Statement of Profit and Loss for the current year 0.75

Topics: Ind AS 12

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