What is Deferred Tax Assets and Liabilities

Question

Accepted Answer

Deferred Tax Assets and Liabilities are temporary differences between the book value and tax value of assets and liabilities.

Deferred Tax Assets arise when the tax value of an asset is higher than its book value.
Deferred Tax Liabilities arise when the tax value of a liability is lower than its book value.
They are recorded on the balance sheet and can be used to offset future tax liabilities or assets.
Examples include depreciation, inventory valuation, and tax credits.
Deferred Tax Assets and Liabilities are calculated using the tax rate that will be in effect when the asset is realized or the liability is settled.

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