Income Tax Expense, DTL & DTA

A

alpha668

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
CFAI curriculum Vol 3, P.454
The last sentence stated : On the income statement, the company’s income tax expense will be the sum of the DTL and income tax payable.
However, I remember that it is stated in Schweser’s study note that : Income tax expense = Income Tax payable + Change in DTL - Change in DTA
Which shall correct ? I am very much confused ! Anyone can help ? Thanks in advance !
 
The second formula is correct. The first is just assuming that there are no DTAs.
 
Swiftly wrote:
The second formula is correct. The first is just assuming that there are no DTAs.
Click to expand...
If the 2nd formula is correct, then the 1st one shall be : Income tax expense = Income tax payable + Change in DTL, right ? unless the acuunulated DTL is zero in the pervious year. Am I right ?
 
If you set up T-accounts, you’ll see why the formula is:
Income tax expense = Income Tax payable + Change in DTL – Change in DTA:
Income taxes payable has a credit balance, and income tax expense has a debit balance: if the credit goes up, the debit has to go up, so you add income taxes payable to get income tax expense.
DTL has a credit balance: if the credit goes up, the debit has to go up, so you add the change in DTL to get income tax expense.
DTA has a debit balance: if the debit goes up, another debit has to go down, so you subtract the change in DTA to get income tax expense.
 
You must log in or register to reply here.
Back
Top