To determine if the tax calculation is current tax or deferred tax, you will need to analyze the timing of the tax payments or deductions in relation to the corresponding income or expense.
Current tax is the tax liability that the company is required to pay based on its current income and expenses for the year. This tax liability is typically calculated based on the applicable tax rate and is paid to the tax authorities in the same financial year in which the income or expense is recognized.
Deferred tax, on the other hand, is the tax liability that is recognized for temporary differences between the accounting income and taxable income. These temporary differences may arise due to differences in timing between when income or expenses are recognized for financial reporting purposes and when they are recognized for tax purposes. Deferred tax liabilities are recognized when the taxable amount is expected to be paid in the future, while deferred tax assets are recognized when the tax amount is expected to be recovered in the future.
In summary, current tax relates to the tax liability based on current year's income and expenses, while deferred tax relates to temporary differences in income and expenses that will affect tax liabilities in future years. By analyzing the timing of tax payments and deductions in relation to income and expenses, you can determine whether the tax calculation is for current tax or deferred tax.
How do you determine if the tax calculation is current tax or deferred tax
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