Reading 38: Income Taxes-LOS b 习题精选

For financial analysis, an analyst must decide on the appropriate treatment of deferred taxes on a case-by-case basis. These can be classified as liabilities or stockholder’s equity, depending on various factors. Sometimes, deferred taxes are just ignored altogether.

The present value of the future payments will not impact the classification of deferred tax liabilities. Growth of the firm and the firm’s operations can each have an impact on classification of deferred tax liabilities. These can result in non-payment of deferred taxes even if they are reversed.

The ROA will not be affected by the classification of the deferred taxes. The total assets will remain the same regardless of whether the deferred taxes are classified as a liability or equity.

In some cases, an analyst will not consider the deferred tax liabilities either liability or equity. This is done if non-reversal is uncertain or when financial statement depreciation is deemed inadequate and, therefore, is difficult to justify increasing stockholder’s equity.

If deferred tax liabilities are expected to never reverse, they should be treated as equity for analytical purposes. This situation usually arises because of growth in capital expenditures.

Depends on the "performance" of the timing difference.

When deferred tax liabilities are included in equity, it will reduce the debt-to-equity ratio (by increasing the denominator), in some cases considerably.