ECON 2 Lecture Notes - Lecture 7: Deferred Tax, Deferred Income, Tax Deduction
Document Summary
Exploit to pay less tax to various tax authorities. Amount reported as tax expense will differ from the amount of tax payable to the tax authority. Amount used to compute income taxes payable. Temporary difference: difference between tax basis of asset or liability and its reported amount in the financial statements which will result in taxable amounts or deductible amounts in future years. Taxable amounts: increase taxable income in future years. Deductible amounts: decrease taxable income in future years. Deferred tax liability: deferred tax consequences attributable to taxable temporary differences. Represents the increase int axes payable in future years as a result of taxable temporary differences existing at the end of the current year. Current tax expense: amount of income taxes payable for the period. Deferred tax expense: increase in the deferred tax liability balance from the beginning to the end of the accounting period. Some dismiss deferred tax liabilities when assessing the financial strength of a company.
