Tax Base of Assets Explained in Minutes | CFA Level 1 | Amquest Education

Understanding the tax base of assets is crucial for identifying temporary differences and calculating deferred tax assets and liabilities.
In this lecture from Amquest Education’s CFA Level I – Financial Statement Analysis module, we break down how tax base is determined, how it differs from the accounting written-down value and how these differences create DTA/DTL in financial statements.

Through a practical depreciation example, this session shows how differences in tax WDV and accounting WDV accumulate over time and how to compute the closing deferred tax using the shortcut:
(Tax Base – Accounting Base) × Tax Rate

What You’ll Learn in This Lecture

• What tax base of an asset actually means
• How tax WDV is calculated using Income Tax depreciation rates
• Difference between tax base and accounting base
• How temporary differences arise due to depreciation
• Shortcut method to compute closing DTA/DTL
• Logic behind cumulative timing differences
• How depreciation policies impact future tax payments

This lecture prepares CFA candidates to evaluate tax base adjustments, calculate deferred tax balances correctly and interpret the impact on balance sheet and profitability.

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