Question 66 of the afternoon mock cfai 2010, ask, afternoon, liability, because

Elliotbay

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?

chetan86

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

dece2011

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$

Bulla564

@smileyface…
Thanks!!!