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Deferred Tax Asset What It Is and How to Calculate and Use It, With from www.investopedia.com A deferred tax asset is an accounting term used to describe a situation in which a company has paid more taxes in the current financial year than the amount it will owe in taxes for the following year. The excess taxes that the company has paid is referred to as a deferred tax asset. This asset can be used to offset future income tax liabilities and reduce the amount that the company needs to pay in taxes. In this way, a deferred tax asset can help a company to increase its profits and cash flow. Deferred tax assets arise when a company has incurred expenses that have not yet been recognized for tax purposes. Such expenses may include depreciation, amortization and losses from investments. When the expenses are recognized for tax purposes, the amount of taxes that the company owes will be reduced, resulting in a deferred tax asset. The asset is then used to offset future taxes that the com...

PPT CHAPTER 7 PowerPoint Presentation, free download ID5848721 from www.slideserve.com Deferred tax liability is a term used to describe a tax obligation that is not due to be paid until a future date. This can occur when a company has made a taxable gain in the current year, but the taxes will not be due until the following year. Deferred tax liabilities are also applicable when a company has incurred a loss in the present year and the tax authorities may allow the company to carry forward the losses to reduce the tax payable in the future. This type of tax liability is also known as ‘tax carryover’. How Does Deferred Tax Liability Work? The concept of deferred tax liability is based on the idea of matching income and expenses in the same year. A company may be able to recognize a gain in the current year, but the tax on that gain will not be due until the following year. This means that the gain is ‘deferred’ until the following year when the tax will be payable. In the same way,...