Business Infographics on LinkedIn: Deferred Tax Assets vs. Deferred Tax Liabilities Credits to Nevena… (2024)

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Deferred Tax Assets vs Deferred Tax Liabilities 🪙

The complexities of Deferred Tax Assets and Deferred Tax Liabilities simplified in an infographic by Nevena Miskovic.

Book income is the amount of income that a company reports to its shareholders, investors, and regulators. It is calculated according to the generally accepted accounting principles (GAAP), which are the standard rules for financial accounting and reporting. Book income reflects the company's financial performance over a certain period of time, and it is used to measure the company's profitability, growth, and valuation.Taxable income is the amount of income that a company reports to the tax authorities, such as the IRS. It is calculated according to the tax laws, which are the rules for determining the tax liability of a company. Taxable income reflects the company's taxable activities over a certain period of time, and it is used to measure the company's tax obligation, compliance, and planning.The purpose, rules, and calculation of book income and taxable income are different, and therefore, they often result in different amounts. For example, some types of income, such as interest from municipal bonds, are not recognized for tax purposes, but they are included in book income. Similarly, some types of expenses, such as depreciation, are deducted differently for tax purposes and book purposes. These differences create a gap between book income and taxable income, which is known as the book-tax gap.The book-tax gap can have significant implications for both companies and tax authorities. For companies, the book-tax gap can affect their financial statements, tax returns, and public perception. For tax authorities, the book-tax gap can affect their tax revenue, enforcement, and policy. Therefore, it is important for both parties to understand the sources and reasons for the book-tax gap, and to monitor and report it accurately and transparently.

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I have to admit I hate this topic.But it is very important especially because tax provision can represent significant portion of income statement.Differences between financial reporting and tax regulations can cause discrepancies in income recognition or expense recognition.When these discrepancies are expected to resolve in the future in a way that reduces the taxable income of a company, a DTA can arise.DTAs are based on "temporary differences."Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the financial statements that will result in taxable amounts or deductible amounts in the future.▶️ 𝗖𝗼𝗺𝗺𝗼𝗻 𝗖𝗮𝘂𝘀𝗲𝘀 𝗳𝗼𝗿 𝗗𝗲𝗳𝗲𝗿𝗿𝗲𝗱 𝗧𝗮𝘅 𝗔𝘀𝘀𝗲𝘁𝘀 𝗼𝗿 𝗟𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝗶𝗲𝘀:𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗟𝗼𝘀𝘀𝗲𝘀If a business has a loss for accounting purposes, it might not be fully utilized for tax purposes in that year. This loss might be carried forward to offset future taxable income.𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲𝘀 𝗶𝗻 𝗗𝗲𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗶𝗼𝗻Some jurisdictions allow for accelerated depreciation for tax purposes compared to accounting depreciation.𝗣𝗿𝗼𝘃𝗶𝘀𝗶𝗼𝗻𝘀 𝗮𝗻𝗱 𝗥𝗲𝘀𝗲𝗿𝘃𝗲𝘀A company might make provisions for bad debts or other future expenses in its financial statements. These provisions reduce accounting profit but might not be deductible for tax purposes until the expense is actually incurred.▶️ 𝗟𝗼𝗼𝗸 𝗮𝘁 𝘁𝗵𝗲 𝗺𝗮𝗶𝗻 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲 𝗯𝗲𝘁𝘄𝗲𝗲𝗻 𝗗𝗧𝗔 𝗮𝗻𝗱 𝗗𝗧𝗟._______________________➕ 𝗙𝗼𝗹𝗹𝗼𝘄 𝗺𝗲 for more finance, accounting, reporting, M&A, IFRS and valuation 𝗙𝗥𝗘𝗘 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀.

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I have to admit I hate this topic.But it is very important especially because tax provision can represent significant portion of income statement.Differences between financial reporting and tax regulations can cause discrepancies in income recognition or expense recognition.When these discrepancies are expected to resolve in the future in a way that reduces the taxable income of a company, a DTA can arise.DTAs are based on "temporary differences."Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the financial statements that will result in taxable amounts or deductible amounts in the future.▶️ 𝗖𝗼𝗺𝗺𝗼𝗻 𝗖𝗮𝘂𝘀𝗲𝘀 𝗳𝗼𝗿 𝗗𝗲𝗳𝗲𝗿𝗿𝗲𝗱 𝗧𝗮𝘅 𝗔𝘀𝘀𝗲𝘁𝘀 𝗼𝗿 𝗟𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝗶𝗲𝘀:𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗟𝗼𝘀𝘀𝗲𝘀If a business has a loss for accounting purposes, it might not be fully utilized for tax purposes in that year. This loss might be carried forward to offset future taxable income.𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲𝘀 𝗶𝗻 𝗗𝗲𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗶𝗼𝗻Some jurisdictions allow for accelerated depreciation for tax purposes compared to accounting depreciation.𝗣𝗿𝗼𝘃𝗶𝘀𝗶𝗼𝗻𝘀 𝗮𝗻𝗱 𝗥𝗲𝘀𝗲𝗿𝘃𝗲𝘀A company might make provisions for bad debts or other future expenses in its financial statements. These provisions reduce accounting profit but might not be deductible for tax purposes until the expense is actually incurred.▶️ 𝗟𝗼𝗼𝗸 𝗮𝘁 𝘁𝗵𝗲 𝗺𝗮𝗶𝗻 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲 𝗯𝗲𝘁𝘄𝗲𝗲𝗻 𝗗𝗧𝗔 𝗮𝗻𝗱 𝗗𝗧𝗟._______________________➕ 𝗙𝗼𝗹𝗹𝗼𝘄 𝗺𝗲 for more finance, accounting, reporting, M&A, IFRS and valuation 𝗙𝗥𝗘𝗘 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀.

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Complete Summary on DTL’s & DTA’s.

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Companies that use the percentage-of-completion method report income earlier than those that use the completed contract method. The accounting rules for long-term contracts can be confusing. Continue reading to find out why.........https://bit.ly/44QlJiq #taxes #accounting

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The accounting rules for reporting income from long-term contracts for book and tax purposes can be confusing. Here’s a brief overview of the accounting rules........https://bit.ly/3LIrQyH #percentageofcompletionmethod #taxes

In the world of accounting and finance, deferred tax is a crucial concept that can have a significant impact on a company's financial statements. Join Gaurav Sahni on Thursday 25th May at 11:00 as we delve into the fundamentals of Deferred Tax in the third webinar of our Project Finance series.While deferred tax can be a complex topic, understanding it is essential for anyone involved in financial reporting and decision-making. In the upcoming webinar, we will explore the basics of deferred tax, including its definition and its different elements, how it is calculated, and how it can affect a company's financial statements.Whether you are a seasoned finance professional or new to the field, this webinar will provide you with valuable insights into deferred tax and its importance in accounting and finance.Sign up now:https://lnkd.in/emnDHuzp#ProjectFinance #FinancialModelling #FinancialPlanning #Webinar #Consulting #Finance

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