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cpaforme22
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| Posted: 25 Apr 2012 at 11:58 | IP Logged
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Can someone please explain how an increase in pension cost will result in DTA? I thought that an increase in the pension cost will make the income lower and thus lower tax in current period, and DTL should be recognized not DTA. Can someone please help?
Thanks!
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astone
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| Posted: 25 Apr 2012 at 12:22 | IP Logged
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An increase in pension cost is considered a temporary timing difference because it is not deductible on the current tax return. The pension cost entry is based on actuarial assumptions and estimates of future payments. It is an asset because we are expensing it on the books now but the actual tax deduction is coming in the future. An example of a deferred tax liability would be an expense you get as a tax deduction now, but the expense will appear on the books in the future with no tax benefit.
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cpaforme22
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| Posted: 25 Apr 2012 at 13:41 | IP Logged
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Thanks do much for your good explanation. It is very clear.
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Topic: Pension Cost
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