Taxes question

franzino

quick question, if the tax rate changes for the year 2010 from 35% to 25% it is going to have an effect on the DTL and DTA of that year, but is it going to also have an effect in DTLs and DTAs of past years????

ishfaque

yes.
But DTL & DTA recorded on the balance sheet is cumulative. So its a onetime calculation on the latest balance sheet with the new tax rate.

DTL(new tax rate) = DTL (old tax rate) +(-) change in DTL due to new rates

JoeyDVivre

Yes. On the balance sheet the liabilities/assets increase/decrease depending on the direction of tax rate change. On the income statement side- Income tax expense , net income , retained earnings and equity are affected depending on whether the company has a net DTL or net DTA.