Question

Major reasons for disclosure of deferred income tax information is (are)

a. better assessment of quality of earnings.
b. better predictions of future cash flows.
c. that it may be helpful in predicating future cash flows for operating loss carryforwards.
d. All of these answers are correct.

Answer 1

The major reasons for the disclosure of deferred income tax information include better assessment of quality of earnings, better predictions of future cash flows, and assistance in predicting future cash flows for operating loss carryforwards.

Step-by-step explanation:

The major reasons for the disclosure of deferred income tax information are:

1. Better assessment of quality of earnings: The disclosure of deferred income tax information helps stakeholders evaluate the quality of a company's earnings. It allows them to understand the impact of deferred income tax on the reported earnings and assess the reliability of the company's financial statements.
2. Better predictions of future cash flows: By disclosing deferred income tax information, stakeholders can gain insights into the timing of future tax payments or refunds, which can affect a company's cash flows. This information helps in making more accurate predictions of the company's future cash flows.
3. Helpful in predicting future cash flows for operating loss carryforwards: Deferred income tax information can aid in predicting future cash flows for operating loss carryforwards. It provides valuable information on the timing and amount of potential tax savings that can be realized from utilizing these carryforwards.
4. All of these answers are correct: In summary, all of the above reasons are correct. Disclosure of deferred income tax information can facilitate better assessment of earnings quality, better predictions of future cash flows, and aid in predicting cash flows for operating loss carryforwards.