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IBC companies set to see substantial impairment of deferred tax assets due to Covid pandemic

IBC companies set to see substantial impairment of deferred tax assets due to Covid pandemic
IBC companies set to see substantial impairment of deferred tax assets due to Covid pandemic

Synopsis

Losses incurred in a company can be carried forwarded for eight years to set off against profits. Several companies that have acquired lossmaking entities under the Insolvency and Bankruptcy Code have created DTAs, on an assumption that they would start making profit in the next few years. And when that happens, the future tax liability of the new entity would come down, boosting its profit.

MUMBAI: Many companies that bought out bankrupt businesses hoping to turn them around are set to face a tax impact because of the Covid-19 pandemic.They may have to take an impairment charge or write off much of the losses incurred by these acquired businesses which they have accounted for as deferred tax assets (DTA) on the balance sheet to offset against future tax. This is because in the current economic environment, the distressed businesses
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The Economic Times