When a change in the tax rate is enacted into law, its effect on existing deferred income tax accounts should be:
A. handled retroactively in accordance with the guidance related to changes in
accounting principles.
B. considered, but it should only be recorded in the accounts if it reduces a deferred
tax liability or increases a deferred tax asset.
C. reported as an adjustment to tax expense in the period of change.
D. applied to all temporary or permanent differences that arise prior to the date of
the enactment of the tax rate change, but not subsequent to the date of the
change.
Answer: reported as an adjustment to tax expense in the period of change
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