Question

***Just please give a original answer and not a copy paste from here or any other website. Thanks*** Explain the effect of various tax rates and tax rate changes on deferred income taxes.

Answer 1

Tax rates other than the current tax rate may be used by the companies only after enactment of future tax rates.

If there is any change in tax rate, then companies should recognize its effect on deferred income tax accounts immediately. It should report such effect as an adjustment to income tax expense in the year in which that change takes place.

if there is any change in tax rate, all deferred assets and liabilities must be revalued by using the new tax rate under asset-liability method.