A Large Public Company Reported That Its Provision for Income

question 54

Essay

A large public company reported that its provision for income taxes was $500 million and that it has a deferred tax liability of 2 billion. A Member of Parliament calls you and says, "I see hundreds of companies who have these huge deferred tax liabilities on their balance sheets. If the government could get even half of what's owed, it could cut the public deficit down to size in a hurry."
Required:
Write a memo to the Member of Parliament explaining the issues.

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Definitions:

Equilibrium Quantity

The quantity of a good or service at which supply equals demand, so there is no excess of supply over demand or vice versa.

Oranges

A citrus fruit that is typically round, orange in color, and contains a pulp divided into segments; widely consumed fresh or as juice.

Florida

Florida is a southeastern U.S. state known for its theme parks, beaches, and diverse wildlife.

Pulp

Pulp refers to a raw material consisting of cellulose plant fibers that are used in creating paper or other products through various processing methods.