Case: Vindhya Cables Ltd has unabsorbed depreciation and carry-forward business losses under tax laws. Under AS 22, a deferred tax asset on these should be recognised:

Correct answer: D) Only to the extent there is virtual certainty, supported by convincing evidence, that sufficient future taxable income will be available

Explanation

For timing differences generally, AS 22 requires reasonable certainty of future taxable income. However, where an enterprise has unabsorbed depreciation or carry-forward tax losses, deferred tax assets are recognised only to the extent there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available.