Deferred Tax - DTA DTL

[maxmeomeo]

Let me try to explain:
The question means that Depreciation expense for Tax purpose will be accounted in the first year. This result in lower taxable income. -> lower tax payable
Dep. expense for financial reporting is devided into 2 years, implying that pretax income is higher than the taxable income -> higher tax expense
Since tax payable < tax expense -> you have DTL.

 

[sgupta0827]

I think I did the same mistake of comparing expenses rather than comparing income.

 

[sgupta0827]

Ok so I have seen a question in Schweser Q bank where it says valuation allowance is not only presented under US GAAP. It’s also presented under IFRS.