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Finance GlossaryDeferred Tax Asset
Deferred Tax Asset
Definition of Deferred Tax Asset
A deferred tax asset is an item on a company’s financial statement that can be used to get tax relief, generally in the event of overpaying taxes or net losses that are carried forward.
Companies tend to deduct these overpayments or losses for accounting purposes and to reduce their overall taxable income. Common examples of deferred tax assets include:
Companies tend to deduct these overpayments or losses for accounting purposes and to reduce their overall taxable income. Common examples of deferred tax assets include:
- Depreciation of fixed assets
- Net financial loss
- Bad debt
Related Terms
Lock In
Lock-in is the period during which you can not sell shares or other financial instruments. The purpose of a lock-in is to ensure that the price and liquidity of the instrument do not take a sudden nosedive. Lock-in is commonly applied to shares held by promoters or major shareholders. You may have heard the term while investing in mutual funds as well, where it is used in reference to close-ended funds and ELSS funds.
Capital in Trading
Capital is the total amount of money that a trader can use to buy and sell securities. There are variations of the term, the most common one is “starting capital”. This is the amount of money a trader starts their journey with.
Capital Asset Pricing Model
Capital Asset Pricing Model or CAPM is used to determine the expected return one can earn on an asset by evaluating the associated risks and how markets price the asset.
Quarterly Results
Quarterly Results refer to the financial statements released by publicly listed companies every three months, covering a specific quarter of the fiscal year. These reports include income statements, balance sheets, cash flow statements, and key metrics like revenue, net profit, earnings per share (EPS), expenses, etc. They offer investors and analysts a snapshot of operational performance, growth trends, and future guidance, enabling better assessment of the company’s financial health and strategic direction compared to annual reports.
Liabilities
Liabilities are debt that a company owes to individuals or financial institutions in the form of bonds, debentures, salary, tax, and others.Liabilities play an important role in the balance sheet of a company as it signals competence to existing and prospective stakeholders.
Deferred Tax Liability
A deferred tax liability is line item on a company’s balance sheet that refers to taxes that owed but due in the future. Common examples of deferred tax liabilities include:
- Paying less tax
- Sales in instalments
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