Deferred Tax Liability Meaning

Accounting glossary · Understand, connect, apply

A deferred tax liability represents future income tax payable that arises from taxable temporary differences. IAS 12 specifies recognition exceptions and measurement rules.

Example

A machine has a taxable temporary difference of 20,000. At an applicable rate of 25%, the liability is 5,000 if no recognition exception applies.

Remember the difference

Current tax concerns taxable profit for the current or prior periods. Deferred tax considers how recovering or settling amounts in the accounts can affect future tax.

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Published 9 November 2026. Prepared with AI assistance. Examples are fictional and simplified for learning.

Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.

Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.

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