M19-3 Which of the following is an argument in favor of the asset/liability method of interperiod income tax allocation? a. Deferred taxes are the result of historical transactions and should be reported in a similar manner. b. Tax effects should be recorded in the same manner as all other revenue and expense transactions that involve changes in specific asset and liability accounts. c. The predictive value of future cash flows, liquidity, and financial flexibility are increased when deferred taxes are reported based on enacted tax rates that will be in effect when the temporary differences reverse. d. Historical tax rates are more verifiable and, therefore, the deferred tax amount is more reliable.
M19-3 Which of the following is an argument in favor of the asset/liability method of interperiod income tax allocation? a. Deferred taxes are the result of historical transactions and should be reported in a similar manner. b. Tax effects should be recorded in the same manner as all other revenue and expense transactions that involve changes in specific asset and liability accounts. c. The predictive value of future cash flows, liquidity, and financial flexibility are increased when deferred taxes are reported based on enacted tax rates that will be in effect when the temporary differences reverse. d. Historical tax rates are more verifiable and, therefore, the deferred tax amount is more reliable.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 1C
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M19-3 Which of the following is an argument in favor of the asset/liability method of interperiod income tax allocation?
a. Deferred taxes are the result of historical transactions and should be reported in a similar manner.
b. Tax effects should be recorded in the same manner as all other revenue and expense transactions that involve changes in specific asset and liability accounts.
c. The predictive value of future cash flows, liquidity, and financial flexibility are increased when deferred taxes are reported based on enacted tax rates that will be in effect when the temporary differences reverse.
d. Historical tax rates are more verifiable and, therefore, the deferred tax amount is more reliable.
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