CFA Practice Question
"Deferral" refers to ______
A. a postponement of recognition of income until the earnings process is actually completed.
B. postponement of tax payments through the use of tax credits.
C. recognition of an asset for all payments made for goods and services not yet delivered.
Explanation: "Deferral" is the accounting process of recognizing a liability when payments are made in advance of the earnings process. Over time, as the earnings process proceeds, income is recognized and liabilities are decreased.
User Contributed Comments 5
| User | Comment |
|---|---|
| shasha | deferral = unearned revenue = advanced from clients |
| Xocrevilo | Careful Shasha, as the answer says "deferral" is the postponement of the RECOGNITION of income, and is not specifically related to when revenue is earned or not. I believe "B" is correct, but less correct than "A" as it refers specifically to taxes. |
| Jurrens | Xocrevilo: notice is says "credits".. you're thinking of DTL, which this isn't the case. Shasha is right in this case. |
| SKIA | I agree - Sasha is right |
| chesschh | recognition keyword |