A deferred tax liability records the future tax consequence of taxable temporary differences. Measure each difference using the enacted rate expected for its supported reversal period, then retain the source and reversal schedule. Do not combine it with current income taxes payable.
Follow recovery or settlement
ASC 740-10-25-23 describes taxable temporary differences as those that produce taxable amounts when the related asset or liability is recovered or settled.
Suppose equipment has a $700,000 book carrying amount and a $400,000 supported tax basis. The $300,000 difference creates a future tax consequence as the asset is recovered. At an enacted 21 percent reversal rate, the gross deferred tax liability is $63,000. Current tax depreciation affects the present return bridge, while the ending difference supports deferred measurement. The calculation does not establish tax basis, recovery method, reversal date, enacted-law applicability, or whether a specific recognition exception applies.
At close, the sum of difference-level liabilities must agree with the jurisdiction ledger before any permitted statement offset.
Put the concept to work
Apply this concept
- Reconcile deferred tax liabilities by difference and reversal period without combining them with current taxes payable.
Learning resources
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