Hot, Inc.'s primary competitor is Cold, Inc. When comparing relative deferred tax asset and liability accounts with Cold, which of the following benchmarking activities should Hot undertake?
A) Scale the deferred tax assets and liabilities by total sales or total assets.
B) Compare raw dollar amounts of deferred tax assets and liabilities.
C) Ignore deferred tax assets and liabilities and focus on overall effective tax rate.
D) Ignore all tax information other than the current tax expense.

Question

Quizplus · Accepted Answer

Scaling deferred tax assets and liabilities by total sales or total assets allows for a more meaningful comparison between companies of different sizes, providing a better understanding of the relative magnitude of these accounts in relation to the overall size of the business.

Hot, Inc'S Primary Competitor Is Cold, Inc