Hello all, here’s my first question. When analyzing deferred liabilities that are expected to never reverse we should treat them as equity for ratio analysis. My question is, why would this event rise? doesn’t this mean that we will owe to the government forever? is the government ok with a business never paying this liability? For analytical purposes, I think the transition to equity benefits a company or not?
The most common situation occurs when a company is growing (investing in PP&E), using straight-line depreciation for its financial statements, and using accelerated depreciation for taxes. For the foreseeable future, the DTL will grow or remain constant, but will not decline.
No. It only means that the present value of the (eventual) payment is negligible.
They’re OK with it the company using accelerated depreciation for tax purposes. They don’t care about the DTL per se.
Comme ci, comme ça.
Debt-to-equity will be better, for example, but ROE will be worse.