CFA Practice Question

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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?
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