Deferred tax liability,
Definition of Deferred tax liability:
Taxes a company must pay but not in the current accounting period. Taxes will be paid in a future year.
Deferred tax liability is a tax that is assessed or is due for the current period but has not yet been paid. The deferral comes from the difference in timing between when the tax is accrued and when the tax is paid. A deferred tax liability records the fact the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.
Because U.S. tax laws and accounting rules differ, a company's earnings before taxes on the income statement can be greater than its taxable income on a tax return, giving rise to deferred tax liability on the company's balance sheet. The deferred tax liability represents a future tax payment a company is expected to make to appropriate tax authorities in the future, and it is calculated as the company's anticipated tax rate times the difference between its taxable income and accounting earnings before taxes.
Meaning of Deferred tax liability & Deferred tax liability Definition