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Expert Advisory Committee opinions on Applicability of tax rate in the Quarterly Financial Results :

Written By Admin on Wednesday, 18 February 2015 | Wednesday, February 18, 2015


The querist being a listed company  furnishes quarterly financial results to stock exchanges and publishes it in newspapers as required by the provisions of  clause  41  of  the  Listing  Agreement. While computing the quarterly financial results, the company considers provision for tax expenses considering the computed taxable income upto that period based on the applicable tax rate for the said financial year. In this regard the querist has sought the opinion of the Expert Advisory Committee on the following issues: 

• Whether calculation of tax expenses based on “best estimate of the weighted average annual income tax rate expected for the full financial year” as laid down under paragraph 29(c) of AS 25 is mandatorily applicable for quarterly financial results being published in compliance to clause 41 of the Listing Agreement with the SEBI. 

• Whether the existing practice of recognising provision for tax expenses considering the computed taxable income for the relevant period based on applicable tax rate is in contravention of the provisions of AS 25.

The Committee opined that paragraph 29(c) of AS 25 is mandatorily applicable for quarterly financial results being published in compliance to clause 41 of the Listing Agreement with SEBI as the clause specifically requires that quarterly and year-to-date results should be prepared in accordance with the recognition and measurement principles laid down in AS 25. The existing practice of recognising provision for tax expenses considering the computed taxable income for the relevant period based on applicable tax rate for the said financial year would be correct provided such tax rate is the rate applicable to the expected total annual earnings of the company for the whole year, that is the estimated average annual effective income tax rate.



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