Question

A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be

a. the net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year.
b. totally eliminated from the financial statements if the amount is related to a noncurrent asset.
c. based on the classification of the related asset or liability for financial reporting purposes.
d. the total of all deferred tax consequences that are not expected to reverse in the operating period or one year, whichever is greater.

Answer 1

The current portion of a deferred tax liability is based on the net deferred tax consequences that will result in net taxable amounts within the next year, indicating when these amounts will affect taxable income.

Step-by-step explanation:

The current amount of a deferred tax liability on a balance sheet is classified based on the expected timing of the reversal of temporary differences. When examining a deferred tax liability, one should focus on:

• The net deferred tax consequences of temporary differences that are anticipated to result in net taxable amounts during the succeeding year.
• The alignment of the deferred tax liability's classification with the related asset or liability for financial reporting objectives.

Therefore, the correct answer to your question is that the current amount of a deferred tax liability should generally be the net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year (a). This aligns with the principle that the presentation on the balance sheet should reflect the timing of when these amounts are expected to affect taxable income.