Respuesta :
Answer: Results from the income tax expense reported on the income statement differing from the amount of income taxes payable to the government.
Explanation:
Deferred Income Tax liability arises when a company records a different amount as payable for taxes from the amount that the government believes it is owed.
It can arise because the company is using a different Accounting system than the government is.
For example, the company could be using Straight line depreciation while the government would be using the Double Declining method of depreciation. The impact of this would be that the government records a high amount of operating expenses than the business does. This will mean that the business will declare a higher income than the government will for the business. The business will therefore record a higher tax expense than the government does. As time goes on this will be corrected.
This is how an income tax liability comes about because the company will pay what the Government wants but not what it should pay. The company will then hold the remaining balance till they are able to pay.
Results from the income tax expense reported on the income statement differ from the amount of income taxes payable to the government.
The following information should be considered:
- Deferred Tax means difference of Tax expenses between Financial Statements and Tax Return because Financial statements are prepared as per GAAP rules, and Tax returns are as per IRS rules.
- The main factor for this difference is Depreciation because Depreciation methods suggested by GAAP and IRS are different.
- Due to this, Tax expenses calculated as per Financial statements and Tax returns may be different.
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