[vodrldnr]

DTA : WARRANTY EXPENSE …

DTL : DEPRECIATION …

this is all I know …

It ain't About How Hard You Hit

[leglock]

Any item where there's a divergence between book (GAAP) treatment and tax (IRS) treatment. This ties together with an m1 which reconciles book income to tax income.

Bad debts expense is another example that creates a book/tax difference. For books, you accrue an amount, but for tax you must use direct write off.

[Nick_P]

I think of it in terms of when it is expensed vs when it is deductible. If an expense occurs in the current year but is not deductible until the proceeding year it potentially creates a Deferred Tax Asset so long as it becomes deductible in the future. A deferred tax liability stems from a deduction taken in the current year but is not expensed until the next year.

For instance: Warranty expense is booked at the time of a sale based on management's estimate; however, the only portion that is deductible is that of which has been performed and paid. This creates deferred tax assets the company will take in the future as they perform the warranty services.

The difference between straight line depreciation management used for assets and MACRS of the IRS can create an expense that is deductible in the current year that will not be booked by the company until a future period. This creates a deferred tax liability that will eventually become payable in the future.

Disclaimer: This may not be a textbook definition and it is only the way my mind comprehends the concept.

AUD - NINJA in Training
BEC - NINJA in Training
FAR - 83
REG - NINJA in Training

Roger

Ninja Notes

Ninja MCQ

[vodrldnr]

Nick, I have the same understanding and use the same method but you know we do not have time when we take actual test…

It ain't About How Hard You Hit

[Nick_P]

My apologies, from the original post, I assumed there was a lack of understanding of the core concept. I am unable to provide a list of all potential DTA's and DTL's but I can say I only remember depreciation, warranty, and bad debt expense on the Ninja and Roger MCQs.

AUD - NINJA in Training
BEC - NINJA in Training
FAR - 83
REG - NINJA in Training

Roger

Ninja Notes

Ninja MCQ

[cpaMD86]

The classification of the deferral is dependent on Tax Income vs. Book Income…so there isn't really a ‘list' of ‘hey, these are only DTAs'. Although, warranty expenses are generally DTA.

Book Income > Tax Income (DTL)
Book Income < Tax Income (DTA)

AUD - 80
BEC - 80
FAR - 82
REG - 79

Be willing to be inconvenienced for your conviction.

Roger/Ninja MCQ/Ninja Notes

FAR: 9/3

[Author]

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