Question

DTL = 10

DTA = 5
VA = 2

does this create a Noncurrent Deferred DTL or DTA?

a) Noncurrent Deferred DTL
b) Noncurrent Deferred DTA
c) Current Deferred DTL
d) Current Deferred DTA

Answer 1

The company has a net Deferred Tax Liability, resulting in a Noncurrent Deferred DTL.

Step-by-step explanation:

DTL stands for 'Deferred Tax Liability' and DTA stands for 'Deferred Tax Asset'. In this case, DTL is greater than DTA, which means the company has a net Deferred Tax Liability. A deferred tax liability arises when the taxable income of a company is lower than its accounting income, resulting in lower taxes payable in the current period but higher taxes payable in the future when these temporary differences reverse. Since the question mentions 'Noncurrent', the correct answer is Noncurrent Deferred DTL (a).