Discussion of decomposing changes in deferred tax assets and liabilities to isolate earnings management activities.

Phillips et al. (2004) (hereafter PPRW) investigate whether changes in eight constitutings of net deferred tax liabilities can be used to identify firms that manage earnings to avoid earnings declines. PPRW stretch out existing literature that examines whether deferr tax charge can be used to lay open earnings management by collecting detailed information about accounts that affect the trap deferred tax liability (and deferr tax expense) to identify specific constituents of the net deferr tax liability that predict whether firms manage earnings. The paper investigates this issue by dint of ...