Deferred Tax Liability

[Poch213]

Hi Guys,
Just wondering about how a DTL turns into equity when is doesnt reverse. I don’t understand as surely this would decrease equity as it is a liability.

 

[S2000magician]

It never turns into equity.
Perhaps you’re thinking of the idea that an analyst may treat it as equity.
If it’s unlikely to have to be paid in the foreseeable future, then an analyst may treat it as equity.

 

[Poch213]

S2000magician wrote:
It never turns into equity.
Perhaps you’re thinking of the idea that an analyst may treat it as equity.
If it’s unlikely to have to be paid in the foreseeable future, then an analyst may treat it as equity.

Hi S2000Magician,
Why would they treat it as an equity? If its a liability surely it would decrease equity?

 

[S2000magician]

You want to buy a car, and your mom lends you $5,000.
Every time you try to pay her back, she says, “Not now … maybe later.”
That’s not much of a liability, is it?

 

[Poch213]

i don’t understand why this is an increase in $15,000 in a DTL. I thought this would be an increase in $15,000 DTA as the taxes paid are quicker than reported on the financial statement and therefore the increase would increase the DTA that would be gained over time?

 

[S2000magician]

Poch213 wrote:i don’t understand why this is an increase in $15,000 in a DTL. I thought this would be an increase in $15,000 DTA as the taxes paid are quicker than reported on the financial statement and therefore the increase would increase the DTA that would be gained over time?

You appear to be discussing a specific question/problem.
Which one? You’ve given us no details.

 

[Poch213]

S2000magician wrote:

Poch213 wrote:i don’t understand why this is an increase in $15,000 in a DTL. I thought this would be an increase in $15,000 DTA as the taxes paid are quicker than reported on the financial statement and therefore the increase would increase the DTA that would be gained over time?

You appear to be discussing a specific question/problem.
Which one? You’ve given us no details.

Sorry S2000magician I had two tabs open. i understnad this now. Second qurestion was refering to this old question.
http://www.analystforum.com/forums/cfa-forums/cfa-level-i-forum/91086431...