Asked by Danielle Efrat on May 07, 2024
Verified
Analyzing the disclosures pertaining to deferred income taxes can provide relevant insights into the actions that a company's management has taken to manipulate net income.
Deferred Income Taxes
Taxes that are payable in a future period due to temporary differences between financial accounting and tax reporting.
Net Income
The net income of a business, which remains after deducting all costs, taxes, and expenses from the gross revenue.
- Recognize the potential for managerial manipulation of net income through deferred income tax accounting.
Verified Answer
JE
Jesse EbingerMay 13, 2024
Final Answer :
True
Explanation :
The way a company accounts for deferred income taxes can provide insights into the management's manipulation of net income because they have the discretion to adjust tax rates and assess the likelihood of realizing deferred tax assets or liabilities, which can impact the financial statements. Therefore, analyzing these disclosures may reveal clues about their decision-making and financial performance.
Learning Objectives
- Recognize the potential for managerial manipulation of net income through deferred income tax accounting.
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