Before 2016, deferred taxes could be classified as current or non-current based on their expected reversal date. As of 2016, however, the FASB mandates that deferred taxes must always be categorized as non-current assets.
Before 2016, deferred taxes could be classified as current or non-current based on their expected reversal date.
As of 2016, however, the FASB mandates that deferred taxes must always be categorized as non-current assets.
Is Deferred Tax a Current Asset? FAQs
Deferred tax is a type of liability that arises when the reported income tax expense in an accounting period differs from the actual cash taxes paid to the government during this period.
No, deferred tax is not a current asset but rather a non-current liability, as it pertains to taxes owed over multiple accounting periods and will only be realized at some point in the future.
A current asset is any asset that will provide an economic benefit for or within one year.
Deferred tax arises due to temporary differences between taxable income (as calculated for financial reporting purposes) and taxable income (as calculated for taxation purposes). This can be caused by differences in the timing of when an expense is recognized for financial reporting purposes compared to taxation purposes.
The deferred tax liability increases a company's total liabilities, thereby reducing its equity, and thus has implications for a company's balance sheet and overall financial position. It also affects a company's income statement by increasing the amount of taxes payable and decreasing the amount of net income that is reported.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.