Question 66 of the afternoon mock cfai afternoon, liability, because

sharksfan

They ask for the deferred tax liability at the end of 2010 and they give the 2009 data. I calculated the deferred tax liability for both years because I thought it was cumulative. Is this not the case?

ishfaque

i made the same mistake...
not sure when to take cumulative or whn to take for single year...

???

manasib

Take another look at this:

The asset was 2000 million, depreciated at SLM for accounting purposes at 10% and DDM for tax purposes.

Now the first year depreciation difference causes difference of 300 (100 accounting and 400 tax) ... Thus DTL = 300*30% = 90

Second year depreciating causes difference of 220 (100 accounting and 320 tax) ... Thus DTL = 220*25% = 55$ (for second year)

At the end of second year, cumulative DTL =
75 (90 revalued downwards due to new tax rate) + 55 = 130$

rkapoor

@smileyface...

Thanks!!!