CFA Practice Question

CFA Practice Question

The deferred income tax account ______
A. is reported as an other asset even though it has a credit balance
B. is where the difference between income tax expense and income tax payable is reconciled
C. is always reported as a long-term liability since the tax is not due until the next fiscal year
Explanation: The difference between income tax expense (based on accounting income) and the actual income taxes payable (based on taxable income) is reconciled in an account called deferred income taxes.

User Contributed Comments 4

User Comment
shasha based on liability method, we should say "the income tax expense is where the difference among income tax payable, deferred tax liability and deferred tax asset is reconciled". we have deferred income tax first, and get income tax expense calculated later. normally deferred income tax is long-term liability account, but is it always? anybody could confirm? if yes, C should be the answer.
masha the account on the (current) asset side is also called the deferred income tax and thus C would be wrong
alexchav For GAAP, it must always be classified as LT. But for IFRS, this may vary.
GBolt93 You have that backwards.
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