CFA Practice Question

CFA Practice Question

The accrual of income tax expense expected to be paid (or recovered) in future years is the definition of the
A. deferred tax liability.
B. deferred income tax expense.
C. income tax expense.
Explanation: Deferred income tax expense is the difference between taxes payable and income tax expense.

User Contributed Comments 13

User Comment
quincy the explanation given seems for the defered tax liability...I am confused. Can anyone please help?
Flyfree "Deferred income tax expense: Accrual of income tax expense expected to be paid (recovered) in future years."
"Deferred tax liability: B/S amounts expected to result in future cash OUTFLOWS"
danlan Still do not get the difference between "deferred tax liability" and "deferred income tax expense".
jayjunk Maybe a $10 deferred tax expense means about $10 will have to be paid in the future.
Whereas a $10 deferred tax liability means $10 * tax rate will have to be paid in future.
Is this right?
PedroEdmundo If I am not wrong the question is not about DTL or DTA but about Deferred tax (can be paid or recovered in the future), so I choose B, guessing that deferred income tax expense is the generic term for both (liabilty or asset)
alki If taxes payable is less than tax calculated by Financial rprt; than you have a def tax liability, if the opposite than you have a deferred tax asset. In both cases, they are deferred tax expenses whether it is a liability or an asset.
jackwez From Google: Accrued income tax expense that is not currently due and payable is referred to as deferred income tax expense.
nasdak deferred tax expense is the current period amount to be added to deferred tax liability account, which is the accumulation of deferred tax expenses, not yet paid.
takor I think Pedro's comment above sheds more light on the q. The question rightly states...'expected to be paid(or recovered). That should imply a response which explains both DTA and DTL. Thx, Pedro
iambroke deferred income tax expense = change in deferred taxes....ie dtl+dta

but dtl+dta = tax expense - taxes payable
Kashi2010 I think this is right..!

Deferred taxes payable occurs due to receipt of deffered revenue to ensure balancesheet correctly reflects the movement. So accounting for known FUTURE tax amounts.

Deffered tax asset/liab occurs due to a difference in tax & accounting reporting treatment. In other words adjusting for under/over payment of CURRENT period taxes.
Procbaby1 Yes Kashi, but a deferred tax payable could become a DTA...
Procbaby1 or rather DTL
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