Question

why deferred tax assets/liabilities are reported in the balance sheet??

Answer 1

Why deferred tax liability reported in the balance sheet ?

When accounting income is less than taxable income, then tax paid on calculated accounting income found shorter than actual tax payable, that difference between tax paid on accounting income and actual tax payable is called deferred tax liability .

It is called liability , because payment of tax already initiated by the company, so after payment of tax amount if any excess portion of tax still found outstanding , it will be paid by the company in the next financial  year. Which will increase the tax burden of the next assessment  year, thus consider itself as a liability and posted in the liability side of the balance sheet.

Why deferred tax asset reported in the balance sheet?  

On the other hand , if due to the temporary differences , accounting income found more than taxable income, then tax paid on accounting income found higher than the actual tax payable amount , such difference is called deferred tax assets, because you have paid excess tax to the government.

It is called asset because it makes the tax liability lower in the next assessment year and benefits the company . Thus , consider itself as an asset and recorded in the asset side of the balance sheet.