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What is a DTA and a DTL?
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Tax Part 3
When to use
When constructing a basic Financial Model
- Depreciation is a common cause of deferred tax assets and liabilities. The diagram below shows the difference between the accounting and tax deprecation which will give rise to DTAs and DTLs:
- A deferred tax liability (DTL) provides a benefit now, but will cause a greater cost later. Deferred tax assets (DTA) create bad news now, but good news later. A DTL will allow you to defer the tax to a later period and a DTA will mean that you will pay more tax now but get the tax benefit later.
- There are six items in the Taxation Control Account, so five will need to be allocated to the Financial Statements.
- DTAs and DTLs are shown on the Balance Sheet.
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