how tax increase affects deferred tax asset. Thanks

CFA Level I
#1

thanks

#2

Opposite of DTL. Say for book purposes you deduct $100 of warranty expense that is not deductibel or tax purposes until year three when you expect to xpend the cash. Current rate is 30% so you expect to save $30 in yr 3 when you put it on your tax return. In year 2 the gov announces that rates will change in yr 3 to 32%. Now when you deduct that $100 on the return it will reduce your taxes by $32. So the answer is it increases the value of your DTA.