The amount of profit received must be reflected in accounting and tax returns. Often the data from these reports is inconsistent. Their alignment will occur only in the future tense. As a result of such a difference, a portion of deferred tax arises, which will be paid in subsequent periods. This part is a deferred tax asset.
How is information reflected in the balance sheet on line 1180 “Deferred tax assets” ?
Accounting and tax accounting in an organization
Any accountant probably knows that there are several types of accounting, the most common (and probably the most important) of which are accounting and tax.
Take our proprietary course on choosing stocks on the stock market → training course
Accounting is a reflection of the entire economic life of an organization through primary documents. When maintaining accounting records, all events that occur in the life of the company are taken into account. The purpose and outcome of operations in the field of accounting is the preparation of annual reports. The year-end financial report is prepared for:
- Internal users. Their role is played by the owners or top managers of the company. Based on the report data, they draw conclusions about the success of the organization during the year and make the necessary decisions
- External users. These include primarily creditors and tax authorities.
Based on the accounting report, the state of the organization and its development prospects are assessed. Reporting helps make important management decisions .
The main documents regulating accounting are the Law “On Accounting” and the Accounting Regulations (PBU).
Tax accounting is a system that is built on the basis of primary documents and summarizes information that is used to calculate the amount of taxes.
The lion's share of all tax accounting is the calculation of income tax. The main act that regulates this type of accounting is the Tax Code .
The main feature of tax accounting is that not all transactions reflected in accounting are accepted for calculating the amount of tax liabilities. Some expenses are not accepted at all, while others are rationed.
Types of differences that may arise during operation
Due to the fact that for accounting purposes all amounts of income and expenses are accepted, and for tax purposes only selectively, differences arise when calculating income tax. These differences can lead to either a tax decrease or an increase. Moreover, in both cases, the tax change can be either permanent or temporary . If such differences arise in the company, then the following entries are generated in accounting:
- Calculation of income tax, reflects the organization's debt to the budget D99 K68.04
- If there are differences that increase tax:
– constantly D99 K68
– temporarily D09 K68
- If there are differences that reduce tax:
– constantly D68 K99
– temporarily D68 K77
It must be taken into account that accounts 09 and 77 are subsequently closed with reverse entries.
| IMPORTANT! Temporary differences do not affect the company's net profit |
Let's look at what the differences look like using an example. Initial data:
revenue 150 thousand rubles, cost 50 thousand rubles, wage fund 20 thousand rubles, artificial fountain in the director’s office 30 thousand rubles, gratuitous receipt from the founder 50 thousand rubles, fines and penalties for taxes 30 thousand roubles.
| Index | Accounting | Tax accounting |
| Revenue | +150 | +150 |
| Cost price | -50 | -50 |
| Payroll fund | -20 | -20 |
| Fountain | -30 | – |
| Proceeds from the founders | +50 | – |
| Fines, penalties | -30 | |
| Profit before tax | +70 | +80 |
It turns out that according to accounting data, it would be necessary to pay less tax than required by tax accounting. Taking into account the differences, accounting data must be brought to the same level as tax accounting data.
It must be borne in mind that the amount of income tax for transfer to the budget is calculated as conditional income (that is, the profit before tax that is obtained according to accounting data), adjusted for all resulting differences. If everything is done correctly, the tax received by this calculation will coincide with the amount of tax according to the declaration.
Deferred tax and taxable temporary differences
An important concept to understand regarding tax deferrals is the concept of taxable temporary differences . This occurs when a business has an asset with a liability value that does not match the current taxable value of that asset. This can occur when accounting treatment and tax laws differ in how depreciation of an asset is calculated.
These temporary differences can affect the financial account because they mean that income and expenses are incurred during one accounting period, but tax is due in another accounting period. The taxable difference may be either taxable or deductible.
The concept of deferred tax assets (DTA)
Deferred tax assets are formed due to differences in the values of indicators in tax and accounting. When such assets arise, there is a temporary tax increase, which means that the tax deduction will be made later .
Deferred tax assets are often created when depreciation is calculated. However, after the object is completely depreciated, the difference will disappear, and, therefore, the deferred asset.
Another interesting case is advertising costs. They are standardized except for cases where advertising is placed in the media, at exhibitions or fairs. At the same time, advertising expenses can be taken into account in tax accounting in the amount of 1% of revenue. That is, if advertising costs 100 thousand rubles, and 1% is 80 thousand rubles, then the difference between the two types of accounting in the company will be 20 thousand rubles, the tax on it is 4 thousand rubles. and for this amount it is necessary to create a deferred tax asset.
It is also very important to remember that if at the end of the period there is a loss, then you can submit a declaration with zero profit, and form a deferred tax asset for the amount of the loss.
Results
A simple rule will help an accountant recognize permanent tax differences: if any expense or income is recognized in accounting, but is not accepted at all or at least partially in tax accounting (neither in the current, nor in subsequent, nor in previous periods), then a constant arises a tax difference that results in a permanent tax expense or permanent tax income.
You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.
Deferred tax asset accounts
The accounting entries relating to deferred tax assets have already been given above.
As you can see, when such assets arise, two accounts appear:
- Account 68 with the corresponding subaccount. The credit of the account reflects our income tax debt to the budget and the creation of a deferred tax asset
- Account 09, which is called “Deferred tax assets”. The debit of the account reflects the creation of an asset, and the credit reflects its closure
In the explanation to the financial statements of the first two forms, it is necessary to reflect information about contingent expenses, differences and accrued deferred assets.
How to determine?
Deferred taxes represent pending payments due or received. Deferred taxes dominate when differences arise between the book value and tax expense attributable to the assets or liabilities of the business. They are also caused by differences between income received and taxable income. This is because financial reporting is based on accrual accounting, that is, recognizing revenue as it is received rather than when it is received, whereas taxation is limited to the income received.
Reflection of SHE in the balance sheet of the organization
In the balance sheet, such assets are reflected in balance sheet asset line 1180.
It must be borne in mind that information on this line can be specified without detail. Moreover, in collapsed form, the amount of deferred tax assets is indicated only if they are taken into account when calculating income tax.
The amount of the deferred tax liability is the balance in the debit of account 09.
In order to find the amount of such an asset by calculation, you need to multiply the temporary difference in expenses by the approved income tax rate.
In addition to being reflected in the balance sheet, deferred tax assets are indicated in Form No. 2. To do this, the change in the deferred asset is calculated as the difference between the credit and debit closing balance of account 09. In this case, the sign of the calculation result does not change.
Causes
There can be many reasons why deferred tax assets arise. The main ones are reflected in the table below.
| No. | Cause | Characteristic | Notes |
| 1 | Business losses | The simplest method by which these tax assets are created is when the business incurs losses. | A company's loss can be carried forward and offset against the profits of subsequent years, thereby reducing tax liabilities. Therefore, such a loss is an asset or deferred tax asset. |
| 2 | Differences in depreciation method in accounting and tax accounting | Created due to differences in depreciation methods in accounting and tax accounting, this. | There are two methods of calculating depreciation: straight and double. With the second method, depreciation costs are high at the very beginning of the term, then they decrease. The company will pay more taxes than what is shown on its books. Therefore, it will report deferred tax assets on the balance sheet. |
| 3 | Differences in depreciation rates for accounting and tax purposes | Not only the depreciation method, but also the depreciation rate can give rise to this tax asset. | For example, if a depreciation rate of 20% is used for tax purposes and a depreciation rate of 15% is used for accounting purposes, this will result in a difference in the actual taxes paid and the taxes reported in the income statement. Therefore, the company will record deferred tax assets on the balance sheet. |
| 4 | Reflection of expenses | Deferred tax assets can also arise when expenses are recognized in the income statement before they are recognized in the tax report. | For example, some legal expenses are not treated as expenses and therefore are not immediately included in tax reporting, but they are reported as expenses on the income statement. |
| 5 | Reflection of income | Sometimes revenue is recognized in one period for tax purposes and in another period for accounting purposes. | If revenue is recognized for tax purposes before it is recorded on the books, the company will pay tax on that high revenue and thus create this tax asset. |
| 6 | Guarantees | Guarantees are one of the most common examples of deferred tax assets. | Let’s say the revenue of an electrical engineering company is 5 million rubles, expenses are 3 million rubles, and profit is 2 million rubles. However, the expenses were divided into 2.5 million rubles. for cost of goods sold, general expenses, etc., 0.5 million rubles. for future guarantees and returns. The tax authorities do not consider future guarantees and returns as expenses, since these expenses were not incurred, but only taken into account. Thus, the company cannot deduct such expenses when calculating taxes and, therefore, must also pay tax on RUB 0.5 million. Therefore, this amount will be part of the deferred tax assets on the balance sheet. |
| 7 | Bad debts | Another example of deferred tax assets is bad debt. | Let's assume that the company has a book profit of 10,000 rubles. for the financial year, which includes a reserve of 500 tr. like a bad debt. However, for tax purposes, this bad debt is not counted until it is actually written off. Thus, the company will have to pay tax on 10,500 rubles. and therefore create this tax asset. |
An example of calculating and reflecting the amount of deferred tax assets in the balance sheet
Let's give a small example of calculating deferred assets and take the most common cases - advertising expenses and depreciation.
| Operation | Accounting | Tax accounting | Difference | Tax rate 20% | Wiring |
| Advertising expenses | -200 | -150 | 50 | 10 | D09 K68 |
| Depreciation | -2667 | -2000 | 667 | 133 | D09 K68 |
We show the indicator values with a minus, so these are the expenses incurred. By posting, we accrue the amount of the deferred tax asset, which will be taken into account in the following periods. Accordingly, according to advertising, the value of the deferred asset is 10, and according to depreciation, 133.
The accounting “plane” for account 09 will be the following scheme:
| Debit | Credit |
| 10 | |
| 133 | |
| Turnover 143 | |
| Final balance 143 |
The amount of the final balance is the organization's prepayment for the future. This amount must be reflected in the balance sheet.
At the same time, the value of these assets, along with other indicators, is reflected in the credit of account 68.
FAQ
Question No. 1. Why is it important to determine these deferred indicators?
Answer. For investors and analysts, the most important question to ask about the deferred tax liability is: “Will it be in the future, and if so, when?” For example, if the deferred tax liability is expected to decrease, the company will be required to make an actual tax payment to the government and its cash account will decrease.
Question No. 2. What are the features of deferred taxes?
There are some key characteristics of deferred tax assets that are reflected in the table below.
| No. | Peculiarity | Explanation |
| 1 | They come with an expiration date if they have not been used up. | This period is 20 years |
| 2 | The next thing to consider is how tax rates affect the value of deferred tax assets. | If the tax rate goes up, it works in the company's favor because the value of the assets also goes up, providing a bigger cushion for more income. But if the tax rate falls, the value of the tax asset decreases. This means that the company will not be able to use the full benefit before the expiration date. |
Question No. 3: What are the consequences of deferred tax control?
After understanding the changes and causes of deferred taxes, it is also important to analyze and project the impact they have on future operations. For example, deferred tax assets and liabilities can have a large impact on cash flows. An increase in deferred tax liability or a decrease in deferred tax assets is a source of cash. Likewise, decreasing a liability or increasing a deferred asset is a use of cash.
Analyzing changes in deferred tax balances should also help understand the future trend toward which those balances are moving. Will the balance continue to grow, or is there a high likelihood of losses in the near future?
These trends often indicate the type of business a company is conducting. For example, a growing deferred tax liability may indicate a company's capital intensity. This is because the purchase of new capital assets is often accompanied by accelerated tax depreciation that exceeds the depreciation depreciation of old assets.
