A company incurred and capitalized €2 million of d
A company incurred and capitalized €2 million of development costs during the year.These costs were fully deductible immediately for tax purposes, but the company is depreciating them over two years for financial reporting purposes.The company has a long history of profitability.When calculating the company’s debt-to-equity ratio, the most appropriate way for an analyst to incorporate the differential tax treatment is to:
A.include it in equity.
B.include it in liabilities.
C.not include it in either equity or liabilities.
参考解答
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2024-10-16 05:34:35
Ans:B.
The different treatment for tax purposes and financial reporting purposes is a temporary difference and would create a deferred tax liability.Deferred tax liabilities should be classified as debt if they are expected to reverse with subsequent tax payments.The long history of profitability implies the company will likely be paying taxes in the following years and hence an analyst could reasonably expect the temporary difference to reverse.
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