Question
In: Accounting
Is it possible that deferred tax assets greater than deferred tax liabilities? In that case, what...
Is it possible that deferred tax assets greater than deferred tax liabilities? In that case, what will be the treatment for the net amount when they offset against each other?
Solutions
Expert Solution
Yes, it is possible that the deferred tax assets are greater than the deferred tax liabilities. The deferred tax assets or liabilities arise due to the timing differences that takes place between the book profit and taxable income. Some timing differences lead to deferred tax assets and some lead to deferred tax liabilities. For instance, if depreciation for tax purpose is more than the depreciation as per books of accounts, it will lead to deferred tax liabilties while creation of provision in the books of accounts shall not be allowed for tax purpose and will lead to deferred tax assets.
In case of set off of deferred tax assets and deferred tax liabilties, the net amount shall be disclosed in the balance sheet under the respective head. In case deferred tax assets are greater than deferred tax liabilties, the net deferred assets after setoff shall be disclosed in the balance sheet under the assets. side.
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