Question about Deferred Tax Liabilities

Joe Musashi

Going through some textbooks and websites trying to wrap my head around deferred tax assets and deferred tax liabilities.

If the carrying amount exceeds the tax base I understand that this will create a deferred tax liability.

Are Deferred Tax Liabilities only created by temporary differences?

L.Jenkins

I presume the deferred liability or difference will carry over to the next period payable.

myshirt

Key thing to get right here before you even start is to know that deferred tax is nothing to do with the taxman. It is an accounting concept.

Think of it in terms of a mechanism to reconcile and explain to the user of the accounts the gap between how the taxman views the consumption of assets and how the financial reporting Accountant views it. Remember, different objectives here. And as you know, fiscal policy will differ all around the world for all different reasons, but IFRS is IFRS no matter where you go. Accounts should be prepared in the one "language" we understand (i.e IFRS) and not be allowed to be distorted by fiscal policy. If it were, how would you pick up a set of accounts for another jurisdiction and understand them u less you were an expert in everything? It's just too much of a brain melter.

Joe Musashi

Thanks for the responses.

Permanent differences, temporary and timing differences were confusing. I am ok now and understand. Deferred tax liabilities are temporary differences and all timing differences are temporary differences. :pac: