Deferred Taxes

Deferred taxes occurs when the company’s management makes a provision for future tax liabilities. This occurs when the company’s taxable profits and the accounting profits have a difference in timing. An example of this is the case where losses are carried forward which result in a deferred tax asset on the balance sheet.

At some point, the company’s deferred taxed asset will come back to the company as a tax relief. This will improve net income eventually.

Read : Inventory