Hey,
A question asks for a decrease in income tax rates would have the most negative impact on equity for the company with the largest balance in: taxable income, net deffered tax assets and net deferred tax liabilities.
I understand that a decrease in income tax rates will result in lower taxable income, net deferred tax assets and liabilities. But why the decrease in deferred tax assets will have a negative impact on stockholders’ equity?
Is it bcuz: change in income tax expense=change in DTL-change in DTA.
A decrease in change in DTA will increase income tax expense, therefore, reducing net income and retained earnings?