Examples of Deferred Tax Asset
The carryover of losses is a deferred tax asset. In cases where a business experiences a loss during a particular fiscal year, can use that loss to reduce its taxable revenue in the subsequent years. In this case, a loss is an asset.
In another case when the accounting rules and tax rules differ, then this deferred tax asset can be created. Suppose, when company’s expenses are recognized in their financial statements prior to the recognition by the tax authorities or when the earnings of the company are subject to taxes before it is taxable in the income statement, then these deferred tax come into being.
Typcially, when the tax rules and regulations for assets and/or liabilities differ given any time, this deferred tax asset is created. Actually, there is no time limit for these asset. They are used whenever it is able to give the most value to the company. Nonetheless, deferred tax assets cannot be used with already filed income tax returns.
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