![]() ![]() It is used to reduce DTA based on the probability that future tax benefits will not be realized. Valuation allowance is a contra account to the DTA account. Provided the difference is temporary and expected to reverse in future periods. Provided the difference is temporary and expected to reverse in future periods.ĭeferred tax liabilities are created when income tax expense is greater than income tax payable. While taxable income is usually based on cash-basis accounting.ĭeferred tax assets are created when income tax payable is greater than income tax expense. Accounting profit is usually based on accrual basis of accounting.While taxable income is usually calculated using accelerated depreciation. Accounting profit is usually calculated using straight line depreciation.The accounting profit and taxable income are different because of differences between the accounting standards and the tax returns. Concept 55: Deferred Tax Liabilities and AssetsĪccounting profit is the pretax income from the income statement.
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