defered tax liability

CFA Level I
#1

for account purpose, use straght-line method to depreciate an asset,for tax purpose, sum-year-digit. for example, in year 1, due to different accounting method,so -> taxable income < pretax income, what is the actual tax payment in this year? is it the tax from sum-year-digit, or also include the defered tax liability? or, defered tax liability will be paid later? Thanks.

#2

Taxes due to inconsistent accouting practices for financial accounting and tax reporting would eventually be reversed [TEMP DIFF]

#3

tax expense = taxes payable + (DTL-DTA)

#4

I believe there should be delta signs before DTL and DTA in the formula above. It’s the change in those amounts that affect tax expense.

#5

say: a machine purchased 4 million. 4 year life. no salvation value. tax rate 0.4 for financial report purpose: use straigh-line deppreciate. for tax purpose, sum-year-digit. for end of 2nd year, what is the tax expense. is it 4*3/10*0.4=0.48 or it is 4*3/10*0.4-4/10*0.4= 0.32. what should be the tax expense? Thanks. chebychev Wrote: ------------------------------------------------------- > I believe there should be delta signs before DTL > and DTA in the formula above. It’s the change in > those amounts that affect tax expense.

#6

well, to work out tax expense dont you need to know how much revenues they are making? in which case it would be: (revenue - depn expense) *0.4

#7

suppose the revenue is high enough to cover both. My question is actually, do we really pay defered tax liability/asset out? what do they mean recover later year? Thanks. Bluey 1.8T Wrote: ------------------------------------------------------- > well, to work out tax expense dont you need to > know how much revenues they are making? > > in which case it would be: > > (revenue - depn expense) *0.4

#8

hw0799 Wrote: ------------------------------------------------------- > suppose the revenue is high enough to cover both. > > My question is actually, do we really pay defered > tax liability/asset out? > what do they mean recover later year? Thanks. I guess, if tax expense is higher than tax payable, you’ve calculated an amount of tax that you should pay based on the financial statements, but in actual fact, you’ve really paid the tax payable amount, which is kinda like you’re “owing” taxes, hence a tax liability. The other way around, you’ve paid for more taxes than your financial statements would indicate, therefore you can “recover” them in later periods by paying less taxes than your future financial statements would indicate.

#9

thanks very much. It cleared up some confusion. for defered tax liability, by means of reverse, if you don’t pay current year, you will pay it later, it is “reverse” mean to? for defered tax asset, if you pay current year, then you could "recover " it later, by reduce some future year tax liaiblity? Thanks. yickwong Wrote: ------------------------------------------------------- > hw0799 Wrote: > -------------------------------------------------- > ----- > > suppose the revenue is high enough to cover > both. > > > > My question is actually, do we really pay > defered > > tax liability/asset out? > > what do they mean recover later year? Thanks. > > I guess, if tax expense is higher than tax > payable, you’ve calculated an amount of tax that > you should pay based on the financial statements, > but in actual fact, you’ve really paid the tax > payable amount, which is kinda like you’re “owing” > taxes, hence a tax liability. > The other way around, you’ve paid for more taxes > than your financial statements would indicate, > therefore you can “recover” them in later periods > by paying less taxes than your future financial > statements would indicate.