Are DTA and DTL treated as equity?
It depends on if these accounts will reverse in the future.
To reflect the under funded pension liability. we increase liability by an amount say k. On the other hand, we decrease comprehensive income (equity) by k*(1-tax rate) as well as deferred tax liability by k*tax rate. In the situation above, can we treat DTL as equity?
I don’t think you can the only way you can use deffered liab as equity is when it’s not reversible which is obviously not the case here.
basically what it means is that you record as you owe somebody some money let’s say but you also know you’re not ever going to have to pay. so if you know that that basically means it’s yours the deferred asset it’s the opposite way … you know you’ll never see that money so you deduct from equity if the asset is not reversible
so that means that a DTA that is not reversible would increase your equity since you get to keep it. right?
no I think it’s the other way around dtl that is not reversible would increase equity dta would decrease somebody please correct me if I’m wrong