Question

If discounting is used in the area of deferred tax assets and liabilities, is there any...

If discounting is used in the area of deferred tax assets and liabilities, is there any particular difficulty relative to tax loss carryforwards?

Homework Answers

Answer #1

The deferred tax assets and liabilities arises due to the timing difference in the taxation. The main problem with the deferred tax assets is how to deal with the timing difference i.e., how to present the valuing in case of tax losses in future and how to carry forward the loss in future. Thus it is very difficult situation.

According to the studies by taking into account of current year tax payments and increase in deferred taxes are better way of taxation for succeding years than just using preceeding years tax payments. Thus if discounting were used in this area, they would be difficulty in the loss carryforwards.

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