Tax payable vs Income Tax Expense

CFA Level I
#1

hi guys, need help on this question. Hope you guys can clear my confusion… Q: Income tax expense reported on a company income statement equals taxes payable, plus the net increase in A. deferred tax assets & deferred tax liabilities B. deferred tax assets, less the net increase in deferred tax liabilities C. deferred tax liabilities, less the net increase in deferred tax assets. My answer is C, but the correct 1 is B…

#2

any1 can help on this?

#3

should be B my friend in this country

#4

Deferred tax assets that increase are due to paying more taxes. Vice versa with tax liabilities.

#5

Do the algebra of ITe = ITp + (change DTL) - (Change DTA) You flip-flop the mufu to ITe + (Change DTA) - (Change DTL) = ITp I think? I would have gone ‘C’ too, but I might be off on that formula.

#6

I meant C. There is no way it’s B

#7

Thanks I_Passed_Level_1, malnoll & jcole21…=) I think there is something to do with the understanding on the Question… For this Q, are we looking for income tax expenses or the tax payable? If the correct answer is C, then I thnk what the Q testing is to look for tax payable…but the way the question been asked seem like we are solving for tax expense…?

#8

Definitely B. If you got $1000 tax expense but you only pay $500, you are left with $500 liability.

#9

revenant Wrote: ------------------------------------------------------- > Definitely B. > > If you got $1000 tax expense but you only pay > $500, you are left with $500 liability. agree with the explanation… So if according to jcole21’s algebra of ITe = ITp + (change DTL) - (Change DTA), then 1000 = 500 + (change DTL) - (Change DTA)? The 500 tax payable plus the net increase in the “liability” of 500 will equal to the total expense of 1000…

#10

You were right the correct answer was C, check the errata in the CFA website. Income tax expense= tax payable + net increase in DTL - net increase in DTA

#11

manowar Wrote: ------------------------------------------------------- > You were right the correct answer was C, check the > errata in the CFA website. > > Income tax expense= tax payable + net increase in > DTL - net increase in DTA always trust the pimp.

#12

manowar Wrote: ------------------------------------------------------- > You were right the correct answer was C, check the > errata in the CFA website. > > Income tax expense= tax payable + net increase in > DTL - net increase in DTA Thank you so much manowar for the sharing…