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Deferred Tax Liability
Term category: Finance/Accounting
In 10 words or less:  An asset created by  a company "underpaying" its taxes during a given time.

Definition: A deferred tax liability occurs when a company underpays its taxes due to a difference between how it accounts for an asset on its books versus how it accounts for it on a tax basis.

Advice: Deferred tax liabilities aren't very good because they increase the liability in the future.  Because this has value, they're recorded as an liabilities.

Investors should give these a little consideration when analyzing a company's financials because high deferred tax assets and liabilities may signal that the company is too aggressive in its accrual accounting.

 

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