CFA Practice Question

There are 1201 practice questions for this topic.

CFA Practice Question

Establishing a valuation allowance reduces ______.

I. the deferred tax asset
II. income
III. the deferred tax liability
Correct Answer: I and II

User Contributed Comments 3

User Comment
stargal117 How does valuation allowance reduce income?

Income tax expense = tax payable + change in DTL - change in DTA.
If DTA decreases, then income tax expense increases, so Net income would increase. No?
stargal117 ha. I just answered my own question. Income tax expense increase will lead to decrease of net income.
khalifa92 smart smart and DTL is unaffected.
You need to log in first to add your comment.