At December 31, 2017, Bren Co. has the following deferred income tax items: • A

Question

At December 31, 2017, Bren Co. has the following deferred income tax items: • A deferred income tax liability of $15,000 related to a non-current asset • A deferred income tax asset of $3,000 related to a non-current liability • A deferred income tax asset of $8,000 related to a current liability Which of the following should Bren report in the non-current section of its December 31, 2017 balance sheet? A) A non-current liability of $4,000. B) A non-current asset of $11,000 and a non-current liability of $15,000. C) A non-current liability of $12,000. D) A non-current asset of $3,000 and a non-current liability of $15,000.

Explanation / Answer

As per Accounting Standard, deferred tax assets & deferred tax liability can be offset only if they relate to income taxes levied by the same taxation authority and the entity has a legally enforceable right to set off current tax assets against current tax liabilities.

So, if the above condition gets satisfied, then Bren Co. should report a non current liability of $ 4000 and if the above condition is not true, then Bren Co. should report a non current asset of $11000 and a non current liablity of $ 15000. It does not matter whether deferred tax is on Non current liability or Current liability and similarily whether it is on Non current asset or current asset. If there is deferred tax liability it will always be Non current Liablity & if there is deferred tax asset then, it will always be Non current. Asset

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