- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 24. Income Taxes
- Subject 5. Recognition and Measurement of Current and Deferred Tax
CFA Practice Question
What effect does an increase in a deferred tax asset have on income tax expense?
A. Decrease
B. Increase
C. No effect
Explanation: A deferred tax asset results from temporary differences that increase current taxable income compared to current pretax accounting income. This expense should not be recorded on an accrual basis until it is incurred in a future period. For this reason, an increase in a deferred tax asset decreases the current period's income tax expense.
User Contributed Comments 3
| User | Comment |
|---|---|
| Lamkerst | ITE = tax payable + change in DTL - change in DTA |
| jnptrsn1 | Wouldnt an increase in in DTA be the result of a surplus in current income tax expense? |
| mkunkel28 | jnptrsn1 my logic was the same, can anyone explain this? |