When future income tax rates change,the effect of the change on net income will be consistent across most companies regardless of their deferred tax balances.

Question

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The effect of future income tax rate changes on net income will not be consistent across companies with different deferred tax balances. For companies with large deferred tax assets, a decrease in tax rates will reduce the value of these assets and lead to a larger decrease in net income. On the other hand, companies with large deferred tax liabilities will benefit from a decrease in tax rates, as the liabilities will be reduced in value and result in a smaller decrease in net income. Therefore, the impact of future income tax rate changes on net income will vary based on a company's deferred tax balances.

When Future Income Tax Rates Change,the Effect of the Change