In a sum, deferred tax liability for the 1st year is calculated as 55k. But in same year there is a revaluation gain of 2,00,000 on which 30% tax rate gives 60k DTL. Which is debited in OCI. But to bring the tax to 55k. 5000 is credited in “P/L”. Why P/L will be effected by revaluation gain’s DTL. The purpose of making revaluation adjustment in OCI was that p/l doesn’t get so much volatile due to revaluation items. But by this process manipulation can be done easily in PL
Share
Data provided by you is incomplete
considering DTL will be 55 and you have 60DTL from revaluation
so balance 5k DTA is assumed from another item which is taken from P&L as OCI ko kab affect karega is not known as per the data provided .
Plant purchased on 1/11/19 Rs 10L. Useful life 10 years. Upward Revaluation on 31/3/20 = 2L, Tax rate = 30%
Tax Dep rate = 5% on WDV
Calculate Deferred Tax for 19-20
By comparing CA(11,58,333) & Tax base(9,75,000) on this asset. We get DTL of 55k. Revaluation amount 2L, & Tax rate = 30%. So DTL on Revaluation gain = 60k. As per ifrs, Revaluation gain and it’s corresponding DTL will be transferred to OCI , But DTL charged to PL will be 55k. So the treatment is charge oci by 60k and credit 5k to P&L.
Query 1. If above treatment is done then P&L is getting affected and management can easily manipulate the EPS by this.
Query2. For computing eps the denominator is NI- Pf. dividend so the net icome is Revenue+ Other Income – Expense. So OCI is exculded while computing EPS of share?
for answering your 1st query your no it can not be manipulated
as per calculation pehle 2 lakh ka difference tha now it’s 1.75 as additional depreciation is charged to P&l
so the excess DTL created will be reversed .
Now there are 2 methods excess depreciation charged due to revaluation could be charged from P&l or OCI as per the revlation method
but if you choose to charge it via P&L toh Deferred tax will also be affected via p&l
coming to your second query of computing eps
eps will be calculated as per IND AS 33
https://www.ril.com/getattachment/57c07cd8-3cba-457b-a972-c02524df79b6/AnnualReport_2020-21.aspx
please check it out for better understanding