Need help regarding bal.sheet analysis

[Lavrentiy]

A deferred tax liability occurs when taxable income is smaller than the income reported on the income statements. This is a result of the accounting difference of certain income and expense accounts. This is only a temporary difference. The most common reason behind deferred tax liability is the use of different depreciation methods in financial accounting and tax accounting.

 

[PaklovesTurkiye]

To all....Thank you for your help/cooperation.

 

[Indrajith]

Dear As per your post .. company is in a good move ,, increase in equity from profit , and % liabilities are less and in tandeem with the growth

Your Assets are growing ... that too is a good sign for the company

 

[PaklovesTurkiye]

Dear As per your post .. company is in a good move ,, increase in equity from profit , and % liabilities are less and in tandeem with the growth

Your Assets are growing ... that too is a good sign for the company

Thanks....can you tell me what this means

Deferred tax liability arising due to accelerated tax depreciation allowance, deferred tax asset arising in respect of provisions

Dear As per your post .. company is in a good move ,, increase in equity from profit , and % liabilities are less and in tandeem with the growth

Your Assets are growing ... that too is a good sign for the company

No problem, if you don't know. I am just asking for general knowledge

 

[Thorough Pro]

Try these

http://www.accountingformanagement.org/vertical-analysis-of-financial-statements/

http://www.accountingformanagement.org/horizontal-analysis-of-financial-statements/

Hello guys, i need help regarding analysis of Balance sheet (vertical analysis and horizontal analysis), please elaborate in detail how so far company is comparatively in 2014 and 2015. Good/progressing or suffering loss, what does it mean/imply by decreasing non current liabilities? company profitable or not? what does it mean if 78% of finances are covered by equity (like in this case)? Step by step elaboration of both analysis will be very helpful.......THANKS.

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[Indrajith]

A deferred tax liability records the fact that the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

 

[ito]

Deferred tax liability arising due to accelerated tax depreciation allowance, deferred tax asset arising in respect of provisions

In most countries it is perfectly OK to maintain two tax accounts. One for tax purpose, the other for investors. While I am paying tax, I want to pay less tax initially so I have to show more capital expenditure, hence will use accelerated depreciation method to depreciate capital investments. But the difference between what you have to pay to tax man and what you have paid accumulates as a liability on the balance sheet. This is called deferred tax liability.

As on deferred tax asset any reasons that saves you taxes in future is accumulated into deferred tax asset account, For ex: in many countries you are given a rebate on paying taxes if you incur operating losses. This rebate is accumulated as deferred tax asset on your balance sheet and will be adjusted while paying taxes in future. As you have to pay less taxes in future, this is called deferred tax asset.

 

[I.R.A]

A question......

what is deferred tax liability?

Deferred tax liability arising due to accelerated tax depreciation allowance, deferred tax asset arising in respect of provisions

To understand this you need to have a little understanding of Pakistan Tax Laws too (Income Tax Ordinance 2001), however, in simple plain terms Tax Authorities differ in their treatment of certain items as recorded by a company in its financial statements. Tax depreciation is one of those ................ tax law provides for specific tax depreciation rates and allowances which normally differ from accounting (tax base of assets vs accounting wdv) .................. in the end whatever depreciation method you choose in totality the depreciation expense both Accounting and tax would be nearly same (timing difference only ................. hence temporary difference), so this differing treatment results in different accounting profit and taxable profit therefore need for deferred tax assets / liabilities. Same is the case with provisions ............................. unless tax authorities permanently disallow any expense the difference in treatment would remain temporary ...................... but where they totally deny claiming any expense it becomes permanent and hence no deferred tax on such items.

I hope this helps in understanding why part of deferred tax to some extent.

 

[redgriffin]

A deferred tax liability arises when income/ taxable profit as per income statement under IFRS/GAAP exceeds the income figure arrived at via tax rules.
Usually this is due to differences in depreciation as per company accounting policy & the Capital Allowances (tax authority term for depreciation) allowed on fixed assets by taxation authorities.