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What are Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL)? How are they created in an M&A transaction?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

Section: Chapter Questions

Problem 17GI

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Question

What are Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL)? How are they created in an M&A transaction?

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.

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