[Anonymous]

Hi all,

I just worked a problem with deferred revenue for magazine subscriptions. I also thought…. would this count as a deferred tax asset? I’m not sure. Please let me know what you think!

Problem:

Company collects $72,000 for magazine subscriptions in year 1. Subscriptions start 1/1/2. No revenue for year 1 I/S, it’s all unearned and a liability. Recognize all $72 for income tax purposes.

My question…. Is this a deferred tax asset?

bi ti

1 0 72

2 72 0

so this is all taxable in year 1. In the “future”, it will be non-taxable book income when earned. Tax already paid in yr1.

in year 2 we recognize on books, but have already paid tax in yr1. This will lower our effective tax rate and current tax liability for year 2.

Is it appropriate to recognize a deferred tax asset in year 1?

Thanks so much 🙂 I just am not sure as I always thought DTA’s were “future deductible amounts”….

[Anonymous]

Yep I'm pretty sure it is a DTA. Basically we have income for tax but not for GAAP which is a unfavorable difference. These unfavorable differences are DTA's. A favorable difference like if we expense more depreciation for tax than GAAP will be a DTL. Hope that makes sense!

[Anonymous]

Thanks aero, that does make sense! I had a feeling it created a DTA, because it is a temporary difference.

Anyone else with thoughts, please let me know. I think is aero is right on with the previous explanation

[Jason2345]

He nailed it..

You will pay less taxes in the future (because you paid them now) than your books will show, so it is a DTA.

[Author]

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