About DTA & DTL Reversal

[hyang]

I have a bit trouble to understand this part. Can someone help to explain it?
The Schweser material states:
DTL expected never to reverse should be treated as equity.
DTL expected to reverse should be treated as liability but calculated at their present value.
What’s the exact meaning of never-to-reverse DTL? Does it mean it’s forever waived - vanishing from balance sheet? And what about DTA reversal? Who and when to determine these reversals? Thx to clear the clouds.

 

[JP_RL_CFA]

mgt decides that if a write off is never going to happen in the future they create a valuation allowance to decrease the DTA.
if mgt keeps buying assets on a regular basis and it’s pretty obvious that the DTL (for depreciation) is never going to reverse, than you would add DTL to equity

 

[hyang]

JP_RL_CFA Wrote:
——————————————————-
> mgt decides that if a write off is never going to
> happen in the future they create a valuation
> allowance to decrease the DTA.
>
> if mgt keeps buying assets on a regular basis and
> it’s pretty obvious that the DTL (for
> depreciation) is never going to reverse, than you
> would add DTL to equity
Wondering what’s the direct impact of keep buying new assets on DTL? Never-to-reverse DTL means the company can forgo the liabilities it once owed? …

 

[map1]

No, the government will come after your business for what you owe to it. The “considered equity” is just for analysis purposes.