CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

A reduction in the valuation allowance will ______

I. reduce reported income taxes.
II. reduce actual income taxes.
III. reduce accounting income.
IV. increase accounting income.
A. I and III
B. I and IV
C. II and IV
Explanation: Actual income taxes are never affected by a change in a valuation allowance established for financial reporting.

User Contributed Comments 3

User Comment
AndyBear Is this correct?
Accounting income equals income before income tax expense.
Income tax expense = taxes payable + change in DTL - change in DTA
Change in DTA goes down from reduction in valuation allowance???
Income tax expense decreases and accounting income increases ???
mazurin The valuation allowance decrease -> DTA increase -> Income tax expense decrease -> Accounting income increase
tichas How this question is rated difficult is beyond me
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