Upon reading the notes to the financial statements of KAR Ltd., you notice that the policies they have chosen tend to be deferring revenue but expensing operating costs as incurred.This approach leads you to believe that KAR Ltd.is employing a(n):
A)Profit maximization strategy.
B)Income tax maximization strategy.
C)Smoothing strategy.
D)Income tax minimization strategy.

Question

Quizplus · Accepted Answer

Deferring revenue while expensing operating costs as incurred is a strategy to report lower profits in the short term, which can lead to paying less in income taxes. This approach is indicative of an income tax minimization strategy.

Upon Reading the Notes to the Financial Statements of KAR