When calculating the tax, how do you know if is deferred Asset or deferred liability?

Answer 1

When calculating tax, you can determine whether it is a deferred asset or deferred liability based on the timing of when the taxes are paid or received.

- Deferred assets are taxes that have been paid in advance, resulting in a future benefit for the company. This can occur when a company makes tax payments in advance of when they are due, resulting in a future tax benefit.

- Deferred liabilities are taxes that have been deferred to a future period, resulting in a future obligation for the company. This can occur when a company has deferred tax payments to a future period, resulting in a future tax liability.

In general, if taxes have been paid in advance and will provide a future benefit, they are classified as a deferred asset. If taxes have been deferred to a future period and will result in a future obligation, they are classified as a deferred liability.