Deferred tax liabilities arise when:

A Tax is paid early

B Taxable income is less than accounting income, creating future tax obligations

C There are no temporary differences

D Tax rates decrease

✓ Correct Answer: Option B

DTLs occur when accounting income exceeds taxable income today, meaning taxes are deferred to future periods.

💡 Why is B) the correct answer?

The correct answer to the question "Deferred tax liabilities arise when:" is Option B: Taxable income is less than accounting income, creating future tax obligations.

The other options — A) Tax is paid early, C) There are no temporary differences, D) Tax rates decrease — are incorrect for this CFA Exam Prep question. As explained above: DTLs occur when accounting income exceeds taxable income today, meaning taxes are deferred to future periods.

📚 About This CFA Exam Prep Practice Question

This 3-level CFA Exam Prep question from the Financial Reporting & Analysis topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

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Deferred tax liabilities arise when:

✓ Correct Answer: Option B

📚 About This CFA Exam Prep Practice Question

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