[ledgermaven]

When my husband and I honeymooned in Ireland many years ago, driving was hard until I did the big flip – don’t think about it, just do the opposite – and then it was easy.

I’m waiting for the big flip to happen with deferred taxes, the language around future deductable amounts and future taxable amounts in temporary differences is still throwing me about when to recognized deferred tax asset or liability.

Any thoughts to help are welcome, Erin go Bragh!

[jenuno01]

Don't over think Deferred taxes. Keep it simple. Why do they arise in the first place? Because of temporary differences between taxable income (tax return) and Net Income (Financial Statements). So, when the income on your tax return is MORE than the income on the FS, this results in a higher tax… since you paid more taxes this year, next year you'll get sort of a “break” or “discount” AKA deferred tax asset. On the other hand, when the income on your tax return is LESS than the income on the FS, this results in a lower tax…since you paid less taxes this year, next year you'll get dinged and have to pay more, AKA deferred tax liability.

As far as knowing what should be a temporary vs a permanent difference, practicing a lot of MCQ's will help you get that straight. Hope this helps!

Class of 2012

[ledgermaven]

than you Jeuno!

[Author]

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