NOLs and Deferred Taxes Flashcards
What are the types of taxes companies pay?
book taxes and cash taxes
What are book taxes?
taxes shown on the IS
What are cash taxes?
taxes paid to gov
How do you find a DTL?
book taxes - cash taxes
Book taxes < Cash taxes
effect on deferred taxes and DTL and why?
Deferred taxes are -ve
DTL decrease
b/c paying more than shown on IS
Book taxes > Cash taxes
effect on deferred taxes and DTL and why?
Deferred taxes are +ve
DTL increase
paying less than shown on IS
Why do DTAs and DTLs come about?
temporary differences in book and cash taxes
Why are DTAs assets?
Represent future cash tax savings
Why are DTLs liabilities?
represent additional cash tax payments in future
Under what circumstances do DTLs arise?
When companies accelerate depreciation for tax purposes
Under what circumstances do DTAs arise?
when a company has negative pre-tax income and creates a NOL
What is a NOL?
an item on the BS that decreases taxable income in the future
How do NOLs work?
Refer to notes, can’t be bothered to write out here
How are NOLs recorded?
NOL x tax rate
How are NOLs related to DTA/ DTL?
they are recorded as DTAs
