Currently doing a self study course before training next month. But DTA/DTLs confuse the hell out of me. I know what they are and how they are created but i can’t figure out an easy way to tell which one gets created. Can anyone help?
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Edited because I realized you already knew everything I said. I believe there is no shortcut to tell which one gets created. From work I've done, I believe you have to build a tax schedule to get exact results.
From my understanding if pretax income is greater on GAAP > Tax return you’ll have a DTL. Is that always the case?
Yes, if pretax income is greater on GAAP, that implies your tax provision on GAAP is greater than on your tax return. So you paid less in cash taxes, which results in a DTL (because of Time Value of Money concept, i.e. money today is better than money tomorrow). There are probably some edge cases where changes to corporate tax rates in between your filing date and the end or your firm's quarter could affect whether or not a DTL is created, but I'm not even an accounting major. So, hopefully someone with more understanding can chime in.
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