A deferred tax liability

Question

Quizplus · Accepted Answer

A deferred tax liability can indeed cause a business's effective tax rate to differ from the statutory rate because it represents taxes that are accounted for in one period but are due in another. It can arise when financial accounting revenues exceed those recognized for tax purposes, leading to higher taxable income in future periods. It is also considered an interest-free loan from the government because the company is deferring tax payment to a future period without incurring interest.

A Deferred Tax Liability