What is the relevance of forecasting (and if relevant, how does one forecast)(1) current portion of LTD and (2) deferred tax liability in financial models?
Anyone
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1) Current portion of LT debt refers to principal repayments due within the coming year. If you're trying to do this for a public company, read the credit agreement(s) for scheduled amortization.
2) DTL occurs when there is a difference between taxable income on a company's books and the IRS. This can get quite technical since it boils down to specific accounting rules (i.e. in purchase accounting, the purchase price of an acquisition is allocated between goodwill and/or a step up in the basis of certain assets. aside from goodwill, some of these can be depreciated. however, being as the depreciation of these items are non-cash, the IRS does not recognize them as tax-deductible; therefore, a deferred tax is created.)
It's relevant, because both affect the FCF that the company will generate in the next year. If they have a lot of DTL, their FCF will be lower because they're going to be paying their taxes that year rather than deferring them through some accounting mechanism.
Higher LTD that is due means less FCFE.
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