Assume that a pretax operating loss was reported for the third quarter of the current year and that prior quarters reported pretax income that was taxed at an effective tax rate of 30%. What are the likely explanations as to why a tax benefit was not recognized on the entire third-quarter loss?

Assume that a pretax operating loss was reported for the third quarter of the current year and that prior quarters reported pretax income that was taxed at an effective tax rate of 30%. What are the likely explanations as to why a tax benefit was not recognized on the entire third-quarter loss?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

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