Hi All, CFAI FSA book says: “To the extent that deferred taxes are not a liability, then they are stockholders’ equity.” How can they be SE? Are they recorded as revenue?? I would apprecaite if somebody could explain this. Thanks!
I’m in the same book, which page number is that referenced on?
Suppose that a deferred tax will never be paid because there is some timing difference or something that will never reverse. In such a case, a deferred tax is not a liability (because it won’t be paid) but something like a phantom charge that deducts from shareholder equity. If you believe the deferred tax bill will never come due, add it back to shareholder’s equity.
It is on page 440. Thank you, JoeyDVivre. It is a strange concept, but I understand it better now…