A deferred income tax liability
A)arises because of differences between U.S.income tax rules and foreign income tax rules.
B)can arise because of "permanent" and "temporary" differences.
C)arise because managers wish to maximize taxable income.
D)can arise when a firm uses special accelerated depreciation for tax purposes while using straight-line depreciation for financial reporting.
E)occurs when the company has a NOL (net operating loss).

Question

Quizplus · Accepted Answer

A deferred income tax liability can arise when there are differences in how income or expenses are recognized for tax purposes versus financial reporting purposes. Using accelerated depreciation for taxes while using straight-line depreciation for financial reporting is a common example of a temporary difference that leads to a deferred tax liability.

A Deferred Income Tax Liability