Deferred tax assets and liabilities

In this lesson

1. 0:00 Deferred tax assets and liabilities explained
2. 0:28 Recognition rules for deferred tax assets
3. 0:52 Measuring deferred taxes step by step
4. 1:38 Where deferred tax movements are recognised
5. 2:09 Presentation and offsetting deferred taxes

About this lesson

This lesson covers the key rules for temporary differences, the tax rates to apply, and where to recognise movements in deferred tax depending on whether they relate to profit or loss or other comprehensive income. Essential for SBR and AFM, this knowledge directly supports your ability to prepare and analyse financial statements accurately. The core technique involves calculating deferred tax as the temporary difference multiplied by the applicable tax rate—using rates that are either in place or substantially enacted at the reporting date. You'll understand the important exceptions: deferred tax liabilities aren't recognised for taxable temporary differences arising from initial goodwill or initial recognition in non-business-combination transactions, and similar rules apply to deferred tax assets. The measurement principle is straightforward: compare your opening and closing deferred tax positions each year and recognise the movement in profit or loss, unless the underlying item is recognised in other comprehensive income (such as a revaluation), in which case the deferred tax follows the same path. Presentation rules matter for your financial statements. Deferred tax is always classified as non-current, and you can only offset deferred tax assets against liabilities if you have a legal right to settle on a net basis and they're levied by the same tax authority. This means multi-jurisdictional deferred taxes must be shown separately, keeping your balance sheet clear and compliant.

Duration: 3m