Carry-forward tax losses create:
A) a deductible temporary difference and therefore a deferred tax asset in that the company will pay more tax on future taxable profits;
B) a taxable temporary difference and therefore a deferred tax asset in that the company will pay less tax on future taxable profits;
C) a deductible temporary difference and therefore a deferred tax liability in that the company will pay more tax on future taxable profits;
D) a deductible temporary difference and therefore a deferred tax asset in that the company will pay less tax on future taxable profits.

Question

Quizplus · Accepted Answer

Carry-forward tax losses create a deductible temporary difference because they can be deducted from future taxable profits to reduce the amount of tax payable. This results in a deferred tax asset, as the company will pay less tax on future taxable profits.

Carry-Forward Tax Losses Create