If a parent and its subsidiary file separate income tax returns, why will the parent frequently have to recognize deferred income taxes? Why might the subsidiary have to recognize deferred income taxes?

If a parent and its subsidiary file separate income tax returns, why will the parent frequently have to recognize deferred income taxes? Why might the subsidiary have to recognize deferred income taxes?

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter2: Gross Income And Exclusions

Section: Chapter Questions

Problem 2MCQ

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Question

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.

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