A deferred tax liability represents a potential future tax benefit associated with income reported in the current year financial statements.

Question

Quizplus · Accepted Answer

A deferred tax liability represents a potential future tax obligation, not a benefit. It arises when taxable income for current financial reporting purposes is less than taxable income calculated for tax purposes, leading to taxes being owed in the future when the difference is ultimately resolved.

A Deferred Tax Liability Represents a Potential Future Tax Benefit