" />

What is a deferred tax liability and why might one be created?

Deferred tax liability is a tax expense amount reported on a company’s income statement that is not actually paid to the IRS in that time period, but is expected to be paid in the future. It arises because when a company actually pays less in taxes to the IRS than they show as an expense on their income statement in a reporting period.




Differences in depreciation expense between book reporting (GAAP) and IRS reporting can lead to differences in income between the two, which ultimately leads to differences in tax expense reported in the financial statements and taxes payable to the IRS.

No Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

Interview Questions
Commonly asked CMA Interview Questions

What is it about this role/the company that motivated you to apply for this position? Describe a situation where you facilitated a project that spanned across several departments/countries or functions. What challenges did you face and how did you overcome them? Give me an example of an occasion when you …

Interview Questions
How to handle difficult questions

You may be over-qualified for the position we have to offer. Strong companies need strong people. A growing, energetic company is rarely unable to use its people talents. Emphasise your interest in a long-term association, pointing out that the employer will get a faster return on investment because you have more experience …

Interview Questions
What is a deferred tax asset and why might one be created?

Deferred tax asset arises when a company actually pays more in taxes to the IRS than they show as an expense on their income statement in a reporting period. Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.