Consider Each of the Following Separate Situations

question 19

Essay

Consider each of the following separate situations.State whether each gives rise to a deferred tax asset (DTA)or a deferred tax liability (DTL).Give reasons for your answer and also indicate why and when any DTA or DTL will be reversed in the accounting records.
(i)Depreciation for accounting purposes exceeds depreciation allowed for income tax purposes
(ii)A provision for doubtful debts has been made for the first time
(iii)Goodwill is being amortised each year
(iv)A loss has been incurred,for both accounting and taxation purposes,but the company
expects to earn profits in each of the next two years

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Definitions:

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Investment

The allocation of resources, usually financial, in expectation of future returns, such as income or capital gains.

Nominal Interest Rate

The stated interest rate on a loan or investment, not adjusted for inflation.

Inflation Rate

The rate expressed in percentage terms by which the overall price level of goods and services increases, leading to a decrease in purchasing power.