Section 3: 25–35%3D

Accounting for Income Taxes

Exam insight

Income tax accounting is the topic candidates fear most, and the exam leans on that. A common MCQ asks you to compute deferred tax after a rate change. You remeasure existing DTAs and DTLs at the new enacted rate, and the adjustment hits income tax expense in the year the law is enacted, so don't use the old rate. Also know that a valuation allowance is required when it's more likely than not that some of a DTA won't be realized.

What AICPA wants you to know

1Distinguish between temporary and permanent differences
2Calculate deferred tax assets and liabilities
3Determine when a valuation allowance is needed
4Calculate income tax expense (current + deferred)
5Understand carrybacks and carryforwards

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Deferred Tax DirectionFuture deductible means DTA, future taxable means DTL, permanent differences mean nothing, all measured at the enacted future rate.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.