Question

Deferred tax liabilities should be netted against which of the following?

Options:
a) Net operating losses
b) Deferred tax assets
c) Tax expense for the period
d) Tax deductions

Answer 1

Deferred tax liabilities should be netted against deferred tax assets. Option B is the answer.

Step-by-step explanation:

Deferred tax liabilities and deferred tax assets arise from temporary differences between accounting and tax rules. Deferred tax liabilities represent future tax obligations, while deferred tax assets are potential future tax benefits. To determine the net impact on a company's financial statements, deferred tax liabilities are offset against deferred tax assets.

This netting process reflects the company's overall tax position considering both current and future tax implications. Options A (Net operating losses), C (Tax expense for the period), and D (Tax deductions) are not directly netted against deferred tax liabilities; rather, they represent different elements of a company's tax situation and financial reporting.

Option B is the answer.