Income Taxes understand, little, better

toocfatoo

Anyone have any suggestions to better understand Deferred Tax Assets and Liabilities? A lot of the calculations for study session seem a little overwhelming at first.

Londonrocks

Yes, DTLs/DTAs are one of the hardest things on the test. Do as many problems as you can find obviously, read the CFAI text & do those problems. Think of a DTA as a prepaid tax, where you are paying "too much" in taxes, therefore in the future you will get to pay less. A DTL is the opposite, where you pay "too little" in taxes, so you will OWE more taxes in the future. When a DTL "reverses" as they call it, it needs to be paid off. If a DTL is not expected to reverse, then it won't need to be paid off, so it can be ignored or treated like equity.

Penny-wenny

Man it's so easy If U understand the following concept:
We have 2 reports:
one for the tax authority.
another the financial report.
When U report the revenue in the tax report before your book(Financial), DTA created.
When U report the revenue in your book(Financial) before in the tax report, DTL created.
When U report the exp in the tax report before your book(Financial), DTL will be created.
When U report the exp in your book(Financial) before in the tax report, DTA created.

Just practice until U master it.

I think the pro in the change in the tax rate and it's related effect in the next year.


Good luck for all of us on June.

kamara5

they might throw a lot of conceptual stuff here, so try to find some problems like that where you actually have to think about which one is being created....and then actually calculating them is tough too

Mechanic

when i went took level 1, i was talking to people in the hallway before the test, and noone seemed to get def taxes...

i had spent hours on them and i mastered them

if you have time, do the same, once you are done you will find them easy...

i would be breaking the CFA rules if i told you if i saw any mention of them on the exam..

you can take a hint...

sure, they can test them this year, but given that most people waste so much time on them..how many questions on deff taxes can you get ? master the rest, come back to it if you have time

the guy in schweser did a good job explaining it, if you dont have the vids, maybe i upload you the video on def taxes and destory my CD's, legally probably a copy right violation, but ethicaly i would feel okay, after all i destroyed my CD before giving you a part of it...

dece2011

Saleh.alabdali Wrote:
-------------------------------------------------------
> Man it's so easy If U understand the following
> concept:
> We have 2 reports:
> one for the tax authority.
> another the financial report.
> When U report the revenue in the tax report before
> your book(Financial), DTA created.
> When U report the revenue in your book(Financial)
> before in the tax report, DTL created.
> When U report the exp in the tax report before
> your book(Financial), DTL will be created.
> When U report the exp in your book(Financial)
> before in the tax report, DTA created.
>
> Just practice until U master it.
>
> I think the pro in the change in the tax rate and
> it's related effect in the next year.
>
>
> Good luck for all of us on June.

well said saleh, if someone managed to explain it better than this, they would be breaking the laws of physics, it is realy that SIMPLE !