Deferred Tax Asset (DTA) is defined as which of the following?

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Multiple Choice

Deferred Tax Asset (DTA) is defined as which of the following?

Deferred tax assets arise from timing differences between how income is reported for tax purposes and on the financial statements, creating future tax benefits when those differences reverse. In other words, they reflect deductible temporary differences and attributes like loss carryforwards or tax credit carryforwards that will reduce future tax payments. Permanent differences, by contrast, do not reverse and thus do not generate DTAs. A describes differences that are permanent, which don’t create a deferred asset. C represents a current tax obligation payable, not a deferred asset. D refers to tax credits being recognized as income, which isn’t how DTAs are defined—the asset relates to future tax relief, not current income recognition.

Deferred tax assets arise from timing differences between how income is reported for tax purposes and on the financial statements, creating future tax benefits when those differences reverse. In other words, they reflect deductible temporary differences and attributes like loss carryforwards or tax credit carryforwards that will reduce future tax payments. Permanent differences, by contrast, do not reverse and thus do not generate DTAs. A describes differences that are permanent, which don’t create a deferred asset. C represents a current tax obligation payable, not a deferred asset. D refers to tax credits being recognized as income, which isn’t how DTAs are defined—the asset relates to future tax relief, not current income recognition.

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