What does deferred tax asset mean on the CPA exam?
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Deferred tax asset. A future tax saving created when an item is deducted for accounting before it is deducted for tax, or when a loss can be carried forward. Reduced by a valuation allowance if realization is not more likely than not.
Defined against ASC 740-10-30-5.
Which CPA exam sections use deferred tax asset?
Deferred tax asset appears in 2 CPA exam sections: BAR, FAR.
Other terms defined against ASC 740-10
- deferred tax liability: The deferred tax consequences of taxable temporary differences: income already in the books that the return has not taxed yet, or a deduction taken on the return ahead of the books.
- tax basis: What an asset or liability is worth for tax purposes, which is often not what it is worth for accounting.
- temporary difference: A difference between the tax basis of an asset or liability and its reported amount that will produce taxable or deductible amounts in future years.
- valuation allowance: The contra account reducing a deferred tax asset to the portion more likely than not to be realized, meaning a likelihood above 50%.
Related terms
- right-of-use asset: The lessee's asset representing its right to use the leased item for the lease term.
- capital asset: For tax, almost everything a taxpayer owns EXCEPT inventory, receivables, and depreciable or real property used in a trade or business.
- contract asset: The right to consideration for goods or services already transferred, where the right still depends on something other than the passage of time.
- more likely than not: A greater than 50 percent chance of being sustained on its merits.
- capital loss: Loss on the sale of a capital asset.
- effective portion: The part of a cash flow hedge's gain or loss that actually offsets the hedged risk.