Regulatory and legislative developments in the United States and abroad have generated continued interest in the financial accounting and reporting framework, including accounting for income taxes. Fundamental to the income tax accounting framework is an understanding of deferred tax accounting. In this publication we provide a refresher of the deferred tax accounting model and why deferred taxes are an important measure within the financial statements.
The income tax accounting model applies only to taxes based upon income, and therefore excludes some other taxes, such as taxes based upon gross revenue or certain transactional taxes. This discussion specifically addresses accounting concepts under US Generally Accepted Accounting Principles (US GAAP), although certain elements may also apply under International Financial Reporting Standards (IFRS) or other non-US accounting standards.