Which of the Following Approaches to Interperiod Tax Allocation Best

question 9

Multiple Choice

Which of the following approaches to interperiod tax allocation best represents an example of the matching principle?

• A) The deferred method of interperiod income tax allocation
• B) Discounting deferred income taxes
• C) Nonallocation of income taxes
• D) The asset/liability method of income tax allocation.

---

Definitions:

NPV Profiles

Graphical representations that show the relationship between a project's net present value (NPV) and various discount rates, helping in the assessment of investment viability.

Average Accounting Rate of Return

A financial ratio indicating the average annual profit earned through an investment, compared to the initial investment cost.

Crossover Rate

The discount rate at which two investment projects have the same Net Present Value (NPV), often used in capital budgeting.

Projects

Specific tasks or initiatives undertaken to achieve a particular goal, often requiring a significant amount of planning and work.