Accounting · Income Taxes
A company makes a major reassessment of its future taxable profits and determines that it is no longer probable that sufficient taxable profits will be available in the future to utilise all of its existing deductible temporary differences (DTDs). What is the direct accounting impact required in the Statement of Financial Position?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The deferred tax asset must be reclassified as a contingent asset.
- 2The current tax liability must be increased.
- 3The carrying amount of the deferred tax asset must be reduced or derecognised.✓
- 4The deferred tax liability must be derecognised.
Correct answer
The carrying amount of the deferred tax asset must be reduced or derecognised.
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