Hey guys! I have a question regarding the difference between treating the DTL as equity and when to excluding the DTL from both debt and equity.
In the textbook it says: “If the liability is not expected to reverse, there is no expectation of a cash outflow and the liability should be treated as equity. By way of example, future company losses may preclude the payment of any income taxes, or changes in tax laws could result in taxes that are never paid. The deferred tax liability should be excluded from both debt and equity when both the amounts and timing of tax payments resulting from the reversals of temporary differences are uncertain.” For me, having the uncertainty of both the amounts and timing of tax payments or if the liability is not expected to reverse, are the same. How can I make a difference between this two scenarios? and when can I treat it as equity or when to exclude it from both debt and equity? Thanks!