M19-3 Which of the following is an argument in favor of the asset/liability method of interperiod income tax  allocation? a.    Deferred taxes are the result of historical transactions and should be reported in a similar manner. b.   Tax effects should be recorded in the same manner as all other revenue and expense transactions that involve changes in specific asset and liability accounts. c.    The predictive value of future cash flows, liquidity, and financial flexibility are increased when deferred taxes are reported based on enacted tax rates that will be in effect when the temporary differences reverse. d.   Historical tax rates are more verifiable and, therefore, the deferred tax amount is more reliable.

1. Under IFRS companies are required to provide a reconciliation between actual tax expense and the applicable tax rate. The purpose(s) of this reconciliation include I.    Making better prediction of future cash flow. II.  Predicating future cash flows for operating loss carryforwards. III. Assessing the composition of the net deferred income tax liability. IV. Assessing quality of earnings. Select one: a.I, II, III and IV. b.I, III, and IV only. c.I, II and IV only. d.I and IV only.     2. Under IFRS deferred tax assets are recognized for I.    Deductible temporary differences. II.  Deductible permanent differences. III. Operating loss carryforwards. IV.  Operating loss carrybacks Select one: a.I and III only. b.I and IV only. c.II and III only. d.I, II, and III.   3. In determining whether to adjust a deferred tax asset, a company should   Select one: a.pass a recognition threshold, after assuming that it will be audited by taxing authorities. b.take an aggressive approach…

Valuation allowances reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future. O True False

A company determines that it is more likely than not that a portion of a deferred tax asset will not be realized. Due to the value of the beginning of the period balance, this determination caused a valuation allowance account to decrease during the current period. This situation will cause Income Tax Expense to decrease. O True O False