Explain the conflicting incentives that relate to reporting of taxes. What might the related strategies signal to investors?

What will be an ideal response?

Answer: Companies want to maximize net income while also minimizing the amount of taxes paid. Minimizing taxes paid keeps more cash to use in business operations; however, investors may note that companies are using income-increasing accounting strategies to increase the book net income — while not actually increasing income from operations. An increase in deferred tax liabilities or decrease in deferred tax assets could indicate to financial statement users that a company is making income-increasing accounting choices as opposed to increasing income from its operations.