Examine the following equations.
For assets:
(a)carrying amount

Question

Examine the following equations.
For assets:
(a)carrying amount < tax base gives rise to deferred tax liability
(b)tax base < carrying amount gives rise to deferred tax asset
For liabilities:
(c)carrying amount < tax base gives rise to deferred tax asset
(d)tax base < carrying amount gives rise to deferred tax liability

Quizplus · Accepted Answer

(a) is incorrect because if carrying amount is less than tax base for assets, it would give rise to a deferred tax asset because in the future, the company would be able to use the tax savings resulting from this difference. 
(c) is correct because if carrying amount is less than tax base for liabilities, it would give rise to a deferred tax asset because the company would be able to deduct the higher amount of liabilities from their taxable income in the future. 
(d) is correct because if tax base is less than carrying amount for liabilities, it would give rise to a deferred tax liability because in the future, the company would have to pay taxes on the higher amount of liabilities.

Examine the Following Equations