Question

Accounting for income taxes can result in the reporting of deferred taxes as any of the following except

a. a current or non-current asset.
b. a current or non-current liability.
c. a contra-asset account.
d. All of these are acceptable methods of reporting deferred taxes.

Answer 1

Deferred taxes can be listed as current or non-current assets or liabilities, but not as contra-asset accounts. They are reflected on the balance sheet using a T-account format.

Step-by-step explanation:

Accounting for income taxes can result in the reporting of deferred taxes as any of the following except a contra-asset account. Deferred taxes can be reported as a current or non-current asset, if they are amounts that are expected to be recovered from future operations. They can also be reported as a current or non-current liability, if they represent amounts owed to the government in future periods. However, deferred taxes are not reported as a contra-asset account because contra assets serve to reduce the value of an asset, which is not the role of a deferred tax item.

Deferred tax liabilities and deferred tax assets are often reported on the balance sheet using a T-account, which has a two-column format with the T-shape formed by the vertical line down the middle and the horizontal line under the column headings for “Assets” and “Liabilities”.