What Is Deferred Tax Liability?
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,...