Tax Deferral question from mock

[Spanishesk]

One of the CFA mocks has a question about the tax deferred liability at the end of 2010...

.....for accounting purposes, the carrying values are 2010: 1800, 2009: 1900.
for tax purposes, the bases are: 2010: 1280, 2009: 1600.

The tax rate droppped to 25%. My understanding is that the DTL would be (1900-1600)*.25+ (1800-1280)*.25 = 205. However, the answer is just (1800-1280)*.25 = 130. Why does the CFA no account for the change in the previous year's DTL?

 

[JCM]

I believe its because the 2010 values already contain the 2009 values, because its cumulative..... but I may be wrong.....

 

[ravinsu]

All it matters on a balance sheet is the current DTL which is the cumulative effect of the previous years.

So its (1800-1280)*.25

 

[Spanishesk]

oo i think i see my mistake.

the way i learned it is that you increase the DTL or Asset by the CHANGE each year. In this case, the second year DTL is 1 is 75 and the year 2 would be 130. the change is therefore 55 from year 1 to year 2, so the answer is 75+55=130. I think we may be saying the same thing in different ways