What does deferred tax liability mean on the CPA exam?
Deferred tax liability. The deferred tax consequences of taxable temporary differences: income already in the books that the return has not taxed yet, or a deduction taken on the return ahead of the books. The mirror of a deferred tax asset, which comes from deductible differences.
Defined against ASC 740-10-20, 25-2.
Which CPA exam sections use deferred tax liability?
Deferred tax liability appears in the FAR section of the CPA exam.
Other terms defined against ASC 740-10
- deferred tax asset: A future tax saving created when an item is deducted for accounting before it is deducted for tax, or when a loss can be carried forward.
- tax basis: What an asset or liability is worth for tax purposes, which is often not what it is worth for accounting.
- temporary difference: A difference between the tax basis of an asset or liability and its reported amount that will produce taxable or deductible amounts in future years.
- valuation allowance: The contra account reducing a deferred tax asset to the portion more likely than not to be realized, meaning a likelihood above 50%.
Related terms
- contract liability: The obligation to transfer goods or services for which the customer has already paid, or for which payment is unconditionally due.
- lease liability: The lessee's obligation to make the remaining lease payments, measured at their present value.
- derecognition: Taking an asset or liability off the books, because it has been sold, settled, transferred or has expired.
- deferred outflow of resources: A consumption of net assets that belongs to a future period.
- accumulated adjustments account: The running total of an S corporation's post-election taxable income less distributions.
- separately stated item: Income, deduction or credit that keeps its own character as it passes through to the owner, because the owner's own situation decides how it is taxed.