I was going through some merger model videos, and it said that the PP&E write up creates a deferred tax liability because the pre-tax income on GAAP basis is lower than the pre-tax income on the tax book (because of higher D&A). Therefore, the taxes payable on your income statement is lower than what you pay in the tax book.
I referred to some of the old forum posts, but I was still unclear on the concept (cannot attach links because I am considered a new user)
Investopedia says - "A deferred tax liability occurs when taxable income is smaller than the income reported on the income statements" -
This statement by investopedia contradicts the videos I watched. Based on investopedia's definition, the write-up creates a deferred tax asset.
Could someone please shed some more light on how deferred taxes occur in an acquisition?
Thanks in advance!!