Admissibility test must be applied to determine the amount of deferred tax asset (DTAs) that can be admitted is called:

Question

Options

• AMaximum DTA
• BMinimum DTA
• CNet DTA
• DGross DTA

• A
  13% (4)
• B
  3% (1)
• C
  7% (2)
• D
  77% (23)

Explanation

Gross DTA (D) is correct because the admissibility test is applied to the total deferred tax asset before any netting or reduction - you must start with the full, unadjusted gross figure to determine how much of it qualifies as an admitted asset under statutory accounting principles (e.g., SSAP No. 101).

Why the distractors are wrong:

• A (Maximum DTA) - not a defined term in this context; it confuses the result of a cap with the input to the test.
• B (Minimum DTA) - no such concept applies here; the test limits admission, it doesn't establish a floor.
• C (Net DTA) - the net DTA is what remains after offsetting deferred tax liabilities (DTLs); the admissibility test is applied before that netting step.

Memory tip: Think "Gross goes Gin first" - the admissibility test must see the Gross DTA in full before it can decide what portion gets admitted. Net comes after the test, not before.

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