When the carrying amount of an asset exceeds the tax base,there will be a deferred tax ...... (a).....; because the taxation payments have effectively been ............(b):

Question

Quizplus · Accepted Answer

When the carrying amount of an asset exceeds the tax base, it creates a taxable temporary difference that will result in a deferred tax liability. This is because the entity has already enjoyed the tax benefits of this asset in advance but will only recognize the expense in the future when the carrying amount is depreciated. Therefore, the tax payments have been deferred to future periods. Choice D is the correct answer as it depicts a liability that is deferred to future periods.

When the Carrying Amount of an Asset Exceeds the Tax