Practice problem 2 CFAI text volume 3 page 457 says that tax changes should be adjusted in the accounts in the period of enactment. I understood the amount of the deferred tax calculation to use expected the rate at the time of reversal. I took this to mean use the expected rate, not necessarily the legislated (or current ) rate. Is it the rule that you have to wait until the period of enactment to enact future expected tax changes or do you completely ignore the expected and just adjust for what has ACTUALLY passed. What rate do you start with in the deferral? The current enacted rate or the rate expected at reversal? Should expected rates be ignored and just use numbers that have actually been enacted? Thanks
The very next section of the question (section iv) says “both deferred tax liabilities and deferred tax assets must be accounted for based on tax rates in effect at their origin” But the answer is no, see above about the period of enactment thing. I dont get it…
to the best of my knowledge, DTL and DTA’s are calculated using expected future tax rates. so say we’re in 2008 and expected rates for 2009 change. you should calculate your 2008 dtl based on the 2009 tax rate.