Which of the following statements best describes considerations regarding a company's tax expense that users of GAAP financial statements may make?
A) The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies.
B) An analysis of earnings before interest, taxes, depreciation, and amortization EBITDA) is often a better approach to comparing the operating results of two companies.
C) One-time effects within a company's effective tax rate should be removed before comparing the effective tax rates across companies or across years for the same company).
D) All these observations are correct.

Question

Quizplus · Accepted Answer

Each statement provides a valid consideration regarding a company's tax expense in the context of GAAP financial statements. A) highlights the importance of understanding the breakdown between current and deferred tax expense for comparison purposes. B) suggests that EBITDA can be a useful metric for comparing operating results, indirectly affecting how one might consider tax expenses in such comparisons. C) points out the need to adjust for one-time effects to make more accurate comparisons of effective tax rates. Therefore, all these observations are correct and relevant to users of GAAP financial statements.

Which of the Following Statements Best Describes Considerations Regarding a Company's