Accounting for DTLs in a merger model

Was going through a guide and was stuck on the explanation of a question.

"How do you account for DTLs in forward projections in a merger model?"

You create a book vs. cash tax schedule and figure out what the company owes in taxes based on the Pretax Income on its books, and then you determine what it actually pays in cash taxes based on its NOLs and newly created amortization and depreciation expenses (from any asset write-ups).

Anytime the “cash” tax expense exceeds the “book” tax expense you record this as an decrease to the Deferred Tax Liability on the Balance Sheet; if the “book” expense is higher, then you record that as an increase to the DTL.


I thought if cash taxes exceeds book taxes, DTL would increase and when book taxes exceed cash taxes, DTL would decrease.

 

Eaque aut odio laudantium voluptatem ut repudiandae quam. Et tenetur doloribus voluptatibus odio odit eos ipsa.

Enim et doloremque doloremque nulla. Nesciunt facilis quia enim. Illum repellendus non facilis aperiam ex.

Career Advancement Opportunities

April 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. New 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

April 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

April 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

April 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (87) $260
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
Secyh62's picture
Secyh62
99.0
5
dosk17's picture
dosk17
98.9
6
GameTheory's picture
GameTheory
98.9
7
CompBanker's picture
CompBanker
98.9
8
kanon's picture
kanon
98.9
9
bolo up's picture
bolo up
98.8
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”