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.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter9: Operating Activities
Section: Chapter Questions
Problem 2FIC
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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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