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Basic Question 11 of 13
Which item will lead to the recognition of a deferred tax asset?
II. Loan
III. Rent received in advance
IV. Donations
I. Development costs
II. Loan
III. Rent received in advance
IV. Donations
User Contributed Comments 5
| User | Comment |
|---|---|
| kapg | i dont get this ! |
| prajacti | I: development costs if capitalised for book purposes result in book income > taxable income, hence DTL II: for loan tax base = book base, hence no temp diff III: rent recd in advance is fully taxable for tax purposes, but not reported in revenue for book purposes. hence taxable income > book income so DTA IV: donations may not be deductible for tax purposes, so permanent diff |
| moneyguy | Thank you for the thorough explanation, prajacti |
| gill15 | Developmental Cost doesnt make sense. If developmental costs are capitalized for book purposes, we also need to know how developmental costs are treated for tax purposes for this to make any sense |
| domedome | Patent and development costs are considered research and development costs and are expensed as incurred. So why should they created temporary differences? Unless they are capitalized and amortized they would not create them. |
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Learning Outcome Statements
explain how deferred tax liabilities and assets are created and the factors that determine how a company's deferred tax liabilities and assets should be treated for the purposes of financial analysis
CFA® 2024 Level I Curriculum, Volume 3, Module 9.