CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following approaches used to calculate the deferred tax consequences due to temporary differences would be most useful in assessing a company's future cash flows?
A. Net-of-tax method
B. Deferred method using present value concepts
C. Liability method
Explanation: The liability method is to be used for tax consequences of temporary differences, as it is the most useful for assessing future cash flows. It is based on the values of the assets and liabilities, the future tax liability or benefit, and future tax rates.

User Contributed Comments 1

User Comment
kalps Temporary differenecs: Most useful for effects on company's cash flow is the Liability method because: (1) Based on values of assets and liabilities (2) Future tax liabilty or benefit (3) Future tax rates
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