In order to have an idea of what a deferred tax asset is, you first need to understand what the content of the concept of deferred tax consists of, which the company must pay from the profits made. In the most general sense, this tax acts as a liability arising for the enterprise or organization in the future. Moreover, the main reasons for their occurrence are the current problems in the field of economic activity and tax payments.
This conditional tax, to some extent, can be calculated according to the financial statements of an enterprise or organization; as a rule, it amounts to the amount of the actual tax that must be paid by an economic entity in a given tax period.
In such calculations, differences naturally arise between the tax and accounting data, since they use different valuation techniques. These differences are temporary, but in the future they may lead to inconsistencies in the estimates of assets and liabilities in the amounts of expenses and income taken into account when calculating taxes.
The calculation of this conditional tax is carried out, as a rule, using three methods. The deferral method is that the deferred tax is set in accordance with the income tax rate , which is legalized at the time the difference is recognized. In the Russian Federation, this method of calculus was applied until 2010, then, in accordance with the provision on accounting, the liability method began to be applied. This method involves accounting for the liabilities of an enterprise or company in profit or loss. There is a third method - the balance sheet method, which consists in comparing the estimates of costs according to tax and accounting data.
Based on this, a deferred tax asset represents that share of deferred tax, which objectively leads to a reduction in the amount of tax paid by an enterprise or organization on profit, and which must be paid in accordance with current legislation in the next reporting period and beyond.
An entity recognizes a deferred tax asset at a time when the already mentioned temporary differences form, and provided that further, in the coming tax periods, it will receive a profit from which it will be able to pay tax. In accounting, a deferred tax asset is recorded taking into account the sum of all such differences, the only exceptions are cases when these differences are not reduced or completely eliminated.
The formula by which such deferred tax liabilities are determined is: But = BP x STN, where: But - the value of the deferred asset, BP - the indicator of the temporary difference, STN - the value of the tax rate that is currently established by law.
In the accounting system, deferred tax assets are indicators that are reflected as stand-alone in a separate account, which is designed to record and reflect precisely deferred tax assets. It is also important that, as already mentioned, these assets in accounting are accounted for autonomously, that is, separately for each type of asset that is the source of the temporary difference in the valuation.
The differences themselves are formed as a result:
- the application of various methodologies for calculating depreciation that a particular company or organization uses in accounting;
- recognition of revenue from goods sold in the form of income from the ordinary business of the enterprise;
- in the event of a violation of the rules for paying income tax by an enterprise or organization;
- the use of inconsistent rules and norms for reflecting interest that an enterprise or organization pays for loans and borrowings.
In the accounting system, such assets are shown by reverse entries: on accrual of Dt 77 - Kt 68 and, accordingly, on repayment of Dt 68 - Kt 77.