Question

Which of the following is false? (a) Under GAAP, deferred taxes are reported based on the classification of the asset or liability to which it relates. (b) Under IFRS, all potential liabilities must be recognized. (c) Under GAAP, the enacted tax rate is used to measure deferred tax assets and liabilities. (d) Under IFRS, all deferred tax assets and liabilities are classified as non-current.

Short answer

Non-current liabilities are those business liabilities that expire more than one year. These liabilities are long term loans and advances and are reported under the balance sheet.

Step-by-step solution

Option (a) Under GAAP, deferred taxes are reported based on the classification of the asset or liability to which it relates is the correct answer.

Option a is the correct answer.

Reason

As per the GAAP, i.e., Generally Accepted Accounting Principles, the amount of deferred taxes is reported under the liability section of the organization's balance sheet. Deferred tax arises due to the difference in the amount of income tax because of tax laws and the accounting reporting methods used by the firm.