- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 9. Analysis of Income Taxes
- Subject 2. Deferred Tax Assets and Liabilities
CFA Practice Question
True or False?
II. A company's tax expense is the tax return liability resulting from current period taxable income.
I. Accounting profit includes a provision for income tax expense.
II. A company's tax expense is the tax return liability resulting from current period taxable income.
Correct Answer: Both statements are false.
II. The tax expense is the aggregate of income tax payable and any changes in deferred tax assets and liabilities.
I. Accounting profit is income before income tax expense.
II. The tax expense is the aggregate of income tax payable and any changes in deferred tax assets and liabilities.
User Contributed Comments 4
| User | Comment |
|---|---|
| poomie83 | 1. NPAT is the profit after provision for tax 2. wouldn't the taxable income lead to tax expense? |
| johntan1979 | Nope. Get your terms right. Accounting profit --- tax expense Taxable income --- tax payable |
| johntan1979 | Tax expense = Taxes payable + DTL Taxable income = Pretax income + Temporary differences creating DTA - Temporary differences creating DTL Taxable income = Pretax income - Accounting depreciation - Tax depreciation |
| Omosewa | Taxable income= Pretax income + Accounting depreciation - Tax depreciation |