Deferred Tax Liabilities | Definition | Formula | Reasons

In this video on Deferred Tax Liabilities, we will study meaning, formula and basis of deferred tax liabilities.

𝐖𝐡𝐚𝐭 𝐚𝐫𝐞 𝐃𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐓𝐚𝐱 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬?
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Deferred tax liabilities are created if income tax expenditure (income statement item) exceeds tax payable (tax return) and the difference is expected to be reverse in the future.

𝐃𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐓𝐚𝐱 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Deferred Tax Liability Formula = Income Tax Expense – Taxes Payable + Deferred Tax Assets

𝐁𝐚𝐬𝐢𝐬 𝐟𝐨𝐫 𝐃𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐓𝐚𝐱 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
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#1 - In the income statement, certain income and expenses are identified, but not in tax return or vice versa.

#2 - Assets or liabilities have unique carrying amounts (balance sheet net value of assets or liabilities) and tax bases.

#3 - Previous tax losses may offset future taxable income.