Accountancy Forum

In the context of deferred tax is there any one who can please elaborate what is temporary and permanent differences with example and also mention deferred tax asset and deferred tax liability.

(06-04-2014, 09:30 AM)Izhar Ul Haq Wrote: [ -> ]In the context of deferred tax is there any one who can please elaborate what is temporary and permanent differences with example and also mention deferred tax asset and deferred tax liability.

Any one having idea and part of this forum please explain deferred tax asset and deferred tax liability.

Deferred tax asset meaning An asset on a company's balance sheet that may be used to reduce any subsequent period's income tax expense. Deferred tax assets can arise due to net loss carryovers, which are only recorded as assets if it is deemed more likely than not that the asset will be used in future fiscal periods.

In simple words deferred tax liability is a provision for future taxation.

(06-11-2014, 04:29 AM)Julia Roberts Wrote: [ -> ]

(06-04-2014, 09:30 AM)Izhar Ul Haq Wrote: [ -> ]In the context of deferred tax is there any one who can please elaborate what is temporary and permanent differences with example and also mention deferred tax asset and deferred tax liability.

Any one having idea and part of this forum please explain deferred tax asset and deferred tax liability.

Its very simple

temporaray difference is something which will ultimately become same over years.

means there may be a difference in books of accounts as per taxation authourities and books of accounts as per IFRS but in certain time it willl become zero

lets suppose there is an asset

as per IFRS you charge dep 20% and asset will fully depreciate in 5 years

however tax authorities depreciate same asset at 25% thus for them it will fully depreciate in 4 years.


so its temporary difference.


now coming to permanant difference its such a difference which is not due to timing.

like there government grant may be charged to PL and it will showed as income but lets assume its exempt in tax so it will never be taxed. so its a permanent difference.