Are deferred income taxes assets or liabilities?
Keeping this in consideration, why is deferred income tax an asset?
Deferred-tax assets are created when a company's recorded income tax (what it reports in its income statement) is lower than that paid to the tax authority. It's usually a good thing to find on a balance sheet, because the company could receive a future tax benefit from it.
Also, what is the difference between deferred tax asset and deferred tax liability?
Difference between Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL) The basic difference between deferred tax asset and deferred tax liability is the difference in income that is computed as per the provisions of different laws.
Deferred tax liability commonly arises when in depreciating fixed assets, recognizing revenues and valuing inventories. For example, money due on a current receivable account cannot be taxed until collection is actually made, but the sale needs to be reported in the current period.