ishfaque

Super I Wrote:
-------------------------------------------------------
> revenant Wrote:
> --------------------------------------------------
> -----
> > Why is it that when capital expenditures are
> being
> > cutdown, deferred tax liability to expected to
> > reverse?
> >
> > Thanks.
>
>
> tax liabilties related to capexoccur because you u
> an accelarated depreciation method for tax
> purposes and a different (slower) method for book.
> Over the life of a given asset th total dollars
> are same and will be equal, but if you keep buying
> new assets at the same level, as the depreciation
> gap narrows on old assets, its built up with the
> new ones. If new asset purchases drop off, then
> the total book depreciation on the existing assets
> will start to catch up with the accelerated
> method, and the deferred tax liability which is
> based on the gap in depreciation will also shrink.


DTL or DTA's are not only the result of depreciation differences, there are many ways you can have differences between book and tax amounts.