The issue of recording deferred income taxes at the combination date applies only to purchase business combinations that are nontaxable for income tax-reporting purposes.

Question

Quizplus · Accepted Answer

In nontaxable purchase business combinations, deferred income taxes are recognized at the combination date because the assets and liabilities are recorded at their fair values for financial reporting purposes, but these adjustments are not recognized for tax purposes, leading to temporary differences.

The Issue of Recording Deferred Income Taxes at the Combination