How do we treat deferred tax asset and deferred tax liability while calculating cash flow from operations in indirect method
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Any increase in DTA or any decrease in DTL would be subtracted
Any decrease in DTA or any increase in DTL would be added
I think it should be that Increase in DTA and Decrease in DTL( we love both the situations) will be subtracted and vice versa. Jaise we deduct or gains and add our losses to Net Income.
I am not totally sure. What do you think?
Yes this is correct. I got confused sorry. I was wanting to say the same thing only though.
I think you are saying opposite.
DTA – is a use of cash and therefore it will be substracted while calculating cfo
DTL – is a source of cash and therefore it will be added while calculating cfo
Increase in DTA is use of fund. So we subtract.
Decrease in DTA is a source of fund. So we add.
Increase in DTL is a source of fund. So we add.
Decrease in DTL is a use of fund. So we subtract.
I think this is the correct treatment.
Yes exactly. I have answered from ‘increase’ point of view because the question was silent.
We should consider it as we consider changes in working capital.
The Best we could do is treat the DTA and DTL as normal current assets and current liabilities respectively.
If you see now,We subtract the increase in current assets similarly if theDTA increases we will subtract it.
Now, same goes with DTL – if it increases we will add toe the CFO as we do it with the current liabilities.