Question of the day
2026-09-21
Accounting
Give three distinct sources of a deferred tax ASSET that are NOT net operating losses.
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
- Accruals/reserves expensed for books before they're tax-deductible — warranty reserves, bad-debt allowances, restructuring/litigation accruals, accrued bonuses (deductible only when paid).
- Deferred revenue that is taxed on receipt of cash but recognized for books later (taxed now, booked later → prepaid tax = DTA).
- Stock-based compensation expensed for books before the tax deduction crystallizes at exercise/vesting. Other examples: capitalized R&D amortized for tax, tax credit carryforwards, and pension/OPEB obligations. The common thread: a deduction or income-timing item that lowers FUTURE tax relative to current book tax. ⚠ Common wrong answer: "Accelerated depreciation." Why it fails: That is the classic DTL driver, not a DTA source — tax depreciation running ahead of book creates a future tax OBLIGATION. DTAs need the opposite timing: book expense recognized before the tax deduction is allowed.
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