Deferred Tax Asset and Deferred Tax Liability

Why Is Deferred Income Tax an Asset?

1. Therefore, the company will create a contra asset account known as a valuation allowance.
2. In this scenario, the applicable discount rate is 5%, and the tax rate is 20%.
3. A deferred tax asset is the opposite of a deferred tax liability, which indicates an expected increase in the amount of income tax owed by a company.
4. A common situation that generates a deferred income tax liability is from differences in depreciation methods.

What are the benefits of deferred tax assets?

Other comprehensive income (OCI)