Under U.S.GAAP which of the following factors is
Under U.S.GAAP, which of the following factors is an analyst least likely to consider when determining if a company’s deferred tax liabilities should be treated as a liabilities or equity?
A.The growth rate of the firm.
B.The average discount rate of liabilities.
C.the expectation that temporary difference will reverse.
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2024-10-16 09:12:37
Ans:B.
The classification of deferred taxes as liabilities or equity depends on the likelihood, or expectation, of reversal.For growing firms and those using accelerated methods of depreciation, the temporary differences tend not to reverse.If the analyst determined the deferred tax liabilities were likely to reverse, and hence should be classified as liabilities, then it would be appropriate to discount them at the company’s average discount rate, but the discount rate is not a factor in determining if reversal is likely.
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