Deferred Tax Asset Term category: Finance/Accounting In 10 words or less: An asset created by a company "overpaying" its taxes during a given time.
Definition: A deferred tax asset is created by overpaying taxes during a given time period. This usually occurs as a result of timing differences based on how the company depreciates its assets. This deferred tax asset reduces the company's tax liability in the future.
StockJargon Advice: Deferred tax assets are good because they reduce the liability in the future. Because this has value, they're recorded as an asset.
Investors should give these a little consideration when analyzing a company's financials because high deferred tax assets and liabilities may signal that the company is too aggressive in its accrual accounting.
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