Deferred tax liability - what is it?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The rules in accordance with which income and expenses are recorded for taxation and accounting purposes have a number of differences. In this regard, the amounts reflected in some documents do not coincide with the indicators of others. Accordingly, there are often difficulties in preparing reports.

PBU 18/02

This provision was introduced to reflect differences in tax amounts in reporting. PBU differentiates indicators into permanent and temporary. The former include income / expenses that are reflected in accounting, but are never taken into account in the calculation of the tax base. They can also be taken into account when determining the latter, but are not subject to fixation in the accounting documentation. Temporary refers to receipts / costs that are shown in the statements in one period, and for taxation purposes are accepted in a different time period. These differences result in a deferred tax liability. This PBU also provides for a certain procedure for reflecting deductions from profits. Conditional expense/income is equal to the productpayment rates to the budget and accounting profit. This adjustment is affected by deferred tax assets and deferred tax liabilities, as well as permanent differences. As a result, the amount is determined, which is reflected in the declaration.

Terminology

Deferred tax liability is that part of the deduction to the budget, which in the next period should lead to an increase in the amount of the payment. For brevity, the abbreviation IT is used in practice. A deferred tax liability is a temporary difference that occurs if the income in the financial statements before tax is greater than in the declaration. To determine the indicator, the formula is used:

IT=profit deduction rate x time difference.

Deferred Tax Liability: Account

The accounting documentation provides for a special article for which IT is reflected. This is sch. 77. Deferred tax liabilities on the balance sheet are shown in line 1420. In the income statement, this value is reflected in line 2430.

SHE

If the deductible difference is multiplied by the rate of deduction, the result is the amount already paid to the budget, but to be credited in the forthcoming period. This value is called a deferred asset. SHE - a positive difference between the current, actual deduction and conditional expense in the amount calculated from the profit. It is written off from the account. 09. If depreciation is provided for in the future cycle, then in accounting it is not charged to fixed assets, but intax - calculated.

Time Difference (IT)

It is determined similarly to the method given for IT. However, this quantity has the opposite sign. A deferred tax liability is an amount that results in higher payments to the budget in future periods. These contributions will need to be paid later.

Specifics

Deferred tax liabilities are accounted for in the period in which the corresponding differences arose. To better understand the essence, you can take VAT on profits when determining the moment when the amounts to be deducted to the budget in the upcoming cycle appear. As a future deduction, VAT is reflected in the account. 76. IT is fixed in the same way, only under article 77.

Adjustments

In the process of reducing or eliminating temporary differences, the deferred liability will also decrease. In the analytics of the article, the information will be adjusted. Upon disposal of an item of an asset or liability for which accruals were made, these amounts will not affect the amount of the accrual in future periods. In such cases, the IT is written off. Deferred liabilities are reflected in the profit and loss account. They are shown in the debit account. 99. At the same time, cf. 77 are credited. In the reporting period, in the process of determining the indicator on line 2420, the repaid amount and the indicator of newly arisen ITs are entered. When filling in lines 2430, 2450, the "debit-credit" rule should be used. According to 09 and 77 from incoming turnoversubtract the cost, then determine the sign of the result. In the reporting, in the corresponding lines, a positive or negative (in brackets) value is indicated. If the IT changes in the direction of increase, the deduction from profit will decrease. And vice versa, if it decreases, the payment will increase.

Current deduction from profits

It consists of the amount actually paid to the budget within the reporting period. This value is calculated based on the size of the conditional income/expense, as well as its adjustments for the indicators used in the formation of IT, IT and fixed payments. For calculations, therefore, apply the formula:

TN=UR(UD) + PNO - PNA + SHE - IT.

The calculation model is defined in PBU 18/02, in paragraph 21. You can check the correctness of the calculation using an alternative formula:

TN=taxable income for the reporting period x rate of deductions to the budget.

If an organization does not make regular tax payments, then the absolute difference between the notional amount calculated from profit and the current one will be equal to IT - IT. This indicator will affect the amount of actual deductions.

Deferred tax liability: transactions

In accordance with the profit and loss reporting structure, the equation NP=BP + SHE - TNP - IT is used to determine net income, in which:

• BP – accounting profit;
• TNP - currenttax.

This formula uses SHE and IT, which are reflected in the balance sheet at:

• DB sch. 09 Cd count. 68;
• db ch. 68 cd sc. 09;
• db ch. 68 cd sc. 77;
• db ch. 77 Cd count. 68.

They have an impact on the amount of deductions from profits. However, these items do not relate to net income. To reflect the method of calculating the actual deduction from profit and at the same time generating information on receipts for distribution, you can show 2 positions. They are, in fact, deferred tax liabilities and assets that affected the account. 99 and 68. At the same time, IT is allowed to enter on a free line or in an explanatory note.

Practical application

How is deferred tax liability shown? An example can be given as follows. Let's say an organization has purchased a computer program. Software cost - 8 thousand rubles. At the same time, the developers limited the period of use of the program. In this regard, the director of the enterprise ordered to write off the costs of acquiring software for two years. In the financial documentation, the amount is included in deferred costs. It is allowed in tax accounting to write off the cost of the program at a time as expenses. As a result, there was a temporary difference. The conditional payment from the profit will be higher than the current one by the value of IT: 8000 x the deduction rate. This will be reflected in the financial documentation as follows:

• Dt sch. 99 Cd sc. 68 (09) – conditional payment;
• Dt sch. 68 (09) 77-IT.

In this case, the item, which reflects the amount of upcoming payments, acts as a passive balance sheet. It accumulates tax amounts that are subject to additional payment in future periods. The write-off of IT is carried out in the coming cycles. In this example, the computer program has been excluded from tax reporting. Accordingly, it does not affect the costs of the enterprise in any way. In accounting, on the contrary, write-offs apply only to a certain part of the program, which falls on the current financial period. Information is displayed in the following way:

• Dt sch. 20 cd sc. 97 - part of the cost of the computer program (not including VAT);
• Dt sch. 19/04 Cd sc. 97 - value added deduction.

In such a situation, the amount of the current payment to the budget will be more than the conditional one. Part of the latter must be paid. In postings, a debit turnover is obtained.