Companies carrying big deferred tax assets on their books typically rely on their tax planning strategies to determine whether those assets need a write-down – yet they disclose little about what those strategies entail. That’s the conclusion of the Georgia Tech Financial Analysis Lab after its recent study of deferred tax assets and corporate disclosures about the tax planning strategies that drive the accounting.
Deferred tax assets appear on the corporate balance sheet to explain temporary differences between book and tax results based on differences in filing requirements. DTAs represent the expected tax savings associated with future tax deductions when expenses are recognized for financial statement purposes before they are recognized in a tax return.
