Deferred tax

In this lesson

1. 0:00 Deferred tax: why it matters
2. 0:47 Understanding tax base and carrying amounts
3. 2:01 Tax base examples across asset types
4. 3:17 Temporary differences explained
5. 4:44 Common temporary difference scenarios
6. 5:40 Calculating deferred tax liability and asset
7. 6:08 Worked example: accrued income timing
8. 9:01 Calculating temporary differences for assets
9. 11:13 Calculating temporary differences for liabilities
10. 12:40 Aggregating differences and final calculation

About this lesson

Deferred tax is essential because income and expenses are often recognised in different periods for accounting and tax purposes. For example, accrued income might be recorded in your financial statements now but only taxed when cash is received. Rather than distorting your tax charge, deferred tax adjusts for these timing differences so the tax expense matches the period in which the transaction occurred. You'll explore the concept of tax base—what an asset or liability is worth for tax purposes—and learn to identify temporary differences between carrying amounts and tax base values. The lesson walks you through practical examples showing how to calculate deferred tax assets and liabilities. You'll see how accelerated tax depreciation, provisions, and revalued assets create temporary differences, and work through step-by-step calculations using the formula: temporary difference multiplied by the tax rate. Real scenarios demonstrate how to adjust financial statements when accrued income is taxed on a cash basis, how inventory write-downs affect tax relief timing, and how to handle multiple differences across assets and liabilities. This is core material for Financial Reporting, Strategic Business Reporting, and Advanced Financial Reporting papers across ACCA and CIMA qualifications, where deferred tax questions appear regularly in both objective tests and case studies. Mastering this concept ensures you can correctly account for tax in financial statements and confidently answer exam questions on timing differences.

Duration: 14m