deferred income tax

(redirected from Deferred Taxes)

Deferred Income Tax

On a balance sheet, a tax that a company will owe on its income, but that has not yet been assessed. Because of differences between tax regulations and the Generally Accepted Accounting Principles, income may be recognized on a balance sheet for accounting purposes, but not for tax purposes. However, that income will eventually be recognized for tax purposes and income tax will then be assessed. This tax is called deferred income tax, and is recorded as a liability on the balance sheet.

deferred income tax

A liability created by income recognized for accounting purposes but not for tax purposes. The liability recognizes future taxes due when earned income is later reported for tax purposes. Use of accelerated depreciation for reporting to the Internal Revenue Service and straight-line depreciation for reporting to stockholders is one of the major reasons a firm includes deferred income taxes as a liability on its balance sheet.
References in periodicals archive ?
Seventeen of the identified firms restated their financial statements due to two problems: (1) improper recording of deferred taxes related to indefinite-lived intangibles acquired in mergers and acquisitions and (2) mishandling of deferred tax assets and liabilities on indefinite-lived intangibles in determining the valuation allowance.
Quickly calculate deferred taxes by legal entity -- The majority of temporary differences impacting the calculation of current and non-current deferred tax assets and liabilities are automatically sourced from within the solution.
The association between deferred taxes and common stock risk.
In this situation, a deferred tax liability is established for the difference between the book basis and tax basis of the indefinite-lived intangible asset, and deferred taxes are recognized.
What Needs to Happen: In order to accurately ascribe deferred taxes, a CEO must ensure the company's financial department understands statutory and GAAP accounting regulations.
Taking into consideration the temporary differences requires the recognition of deferred taxes.
Exploration & Production: The effect of the unfavorable adjustment to deferred taxes in 1993 to reflect the higher federal tax rate coupled with the favorable deferred tax adjustment recorded in 1992 significantly distorted the results of CNG's exploration and production (E&P) operations.
The objective of the statement is to account for current and deferred taxes payable because of temporary differences arising between financial statement reporting and tax reporting.
Since there were no differences between financial and tax accounting, there were no deferred taxes.
Under Statement 96, deferred taxes represent the sum of the amounts that would be payable or refundable based on the filing of hypothetical tax returns that include only the future reversals of existing temporary differences by year.
The measurement of deferred taxes becomes complicated, however, when the enterprise has both taxable and deductible amounts and/or when current and enacted future tax rates are different.