Income tax rates change over time, so the deferred tax liability need not represent the amount of taxes that the firm must pay later.

Question

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Income tax rates can change due to various factors such as changes in government policies, economic conditions, and political factors. Therefore, the amount of taxes that a firm must pay in the future may differ from the amount of deferred tax liability recorded on its balance sheet.

Income Tax Rates Change Over Time, So the Deferred Tax