CFA Practice Question

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CFA Practice Question

Taxable temporary differences result in a deferred tax ______ when the carrying amount of a liability is ______ than its tax base.
A. asset; less
B. liability; more
C. liability; less
Explanation: Or when the carrying amount of an asset is more than its tax base.

User Contributed Comments 1

User Comment
teje an example of a DTL when carrying amount of liability is less than tax base of liability is convertible debt.

For tax purposes, the convertible debt treated entirely as debt, resulting in lower taxes payable than income taxes. As on the accounting side the convertible debt may be split into an equity and debt portion.
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