CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following statements about deferred taxes is CORRECT?
A. Deferred taxes due to differences in depreciation methods used for reporting and tax accounting never reverse so long as the same methods are adhered to.
B. Deferred taxes due to interest earned on tax-exempt bonds are self-reversing at the time of maturity of the bond, as bond premiums and discounts offset the coupon income over time.
C. Tax credits cause permanent differences.
Explanation: Items that appear only on either financial statements or tax returns, but not on both, cause permanent non-reversing differences. The tax credits item only appears on the tax statement and does not reverse itself. Depreciation, on the other hand, is self-reversing under normal circumstances.

User Contributed Comments 1

User Comment
danlan tax-exempt bonds are not self reversing, so they are permanent differences.
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