CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following is false?

A. When tax rates change, the deferred tax liability or asset is adjusted to the new amount that is now expected based upon the new rate.
B. The adjustment to the deferred tax asset or liability when rates change is computed using the old rate.
C. The adjustment to the deferred tax asset or liability when rates change is computed using the new rate.
D. The adjustment will be the amount to bring the balance in the deferred tax asset or liability to the amount that would be calculated if the new rate had been used all along.
Correct Answer: B

The new rate should be used for any calculations, and the amount of the adjustment would be what it takes to bring the balance of the deferred tax asset or liability to the amount that it would be had it been based on the new rate all along.

User Contributed Comments 4

User Comment
stranger correct answer here is B since D is true and has been given as explanation
kalps Spot on old boy, I agree
johntan1979 So I guess you could say that the tax rate change is retrospective.
ecapocas Eh. It's kinda misleading. To do the full process you need to use both rates, then the difference between the two is your adjustment to the balances.
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