Deferred Taxes

Posted in Finance, Accounting and Economics Terms, Total Reads: 787

Definition: Deferred Taxes

The profit according to the financial statements prepared according to GAAPs (Generally Accepted Accounting Practices) and the Income Tax Act are different. This is due to the difference in accounting conventions.

This difference is accounted through deferred taxes. It is the temporary difference which arises due to the timing of accounting the assets or liabilities.

If there’s a future obligation due to the timing difference, it is called as deferred tax liability or else it is called deferred tax asset.

This difference is primarily due to the difference in carrying amount of assets and liabilities recognized in the financial statements prepared for the shareholders and for tax purposes.



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