Section 3: 25–35%3D
Accounting for Income Taxes
Exam insight
Income tax accounting is the topic candidates fear most - and the AICPA leans on that fear. The most common MCQ asks you to compute deferred tax after a rate change: you remeasure existing DTAs and DTLs at the NEW enacted rate, and the adjustment hits income tax expense in the year the law is enacted. Don't use the old rate. Also know that a valuation allowance is required when it's more likely than not that some of a DTA won't be realized.
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What AICPA wants you to know
- 1Distinguish between temporary and permanent differences
- 2Calculate deferred tax assets and liabilities
- 3Determine when a valuation allowance is needed
- 4Calculate income tax expense (current + deferred)
- 5Understand carrybacks and carryforwards