Asked by Isaiah Diller on Jul 08, 2024
Verified
Temporary differences this year that will cause taxable income to be higher than book income give rise to a deferred tax asset.
Deferred Tax Asset
An accounting term for items that will reduce future tax payments, such as carryover losses or credits.
Book Income
The net income reported by a company as per its financial statements, reflecting its accounting principles rather than taxable income.
- Perceive the impact that temporary divergences have on deferred tax assets and liabilities.
Verified Answer
KH
Kayla HuggardJul 13, 2024
Final Answer :
False
Explanation :
Temporary differences that cause taxable income to be higher than book income give rise to a deferred tax liability, not a deferred tax asset. A deferred tax asset arises when temporary differences cause book income to be higher than taxable income, resulting in a reduction in taxes payable in future years.
Learning Objectives
- Perceive the impact that temporary divergences have on deferred tax assets and liabilities.
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