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191 deferred income taxes at the end of its first year of operations harding constru 4298548


191. Deferred income taxes
At the end of its first year of operations, Harding Construction, Inc., included in its balance sheet a long-term liability entitled “Deferred Income Taxes.”
(a) Briefly explain what deferred income taxes represents, including how this liability came into existence and whether such an item is generally perceived as favorable or unfavorable from company management's point of view.
(b) If Harding Construction, Inc., is a successful, growing business, would you expect the liability for deferred income taxes to increase or decrease over the next few years? Explain.


192. Loss contingencies
Ocean to Coast Airlines could, at any time, incur a large loss if one of its airplanes were to crash. Is this an example of a loss contingency which should be disclosed in the company's financial statements? Explain.



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