Current Deferred Taxes Assets
Short-Term Future Tax Benefits from Temporary Differences
Current Deferred Taxes Assets represent the portion of deferred tax assets expected to be realized or recovered within the next 12 months or operating cycle. They arise from temporary differences where book expenses exceed taxable expenses (or book income is less than taxable income) in the current period, creating future deductible amounts that will reduce taxable income when they reverse.
What They Represent
Current Deferred Taxes Assets are future tax savings from deductible temporary differences that will reverse soon.
They reflect situations where you've already recognized more expense (or less income) on the books than on the tax return, so you'll pay less tax when the difference flips.
Distinct from taxes receivable (actual overpayments or refundable credits).
Common Sources
- Accrued expenses not yet tax deductible (warranties, bonuses)
- Inventory reserves or write-downs
- Allowance for doubtful accounts
- Short-term loss carryforwards
- Prepaid expenses deductible for tax but not yet expensed on books
- Revenue deferred for books but recognized for tax (short-term)
Most deferred tax assets from accruals are current if reversal is near-term.
A Quick Example
Company accrues $1 million warranty expense this year (book expense) but can't deduct for tax until claims paid next year.
- Tax rate 25% → $250k deferred tax asset created
- If claims expected next year → classify as current DTA
- Next year: Pay claims → tax deduction → use the $250k benefit to reduce tax payable
Future tax bill drops by the DTA amount when difference reverses.
Accounting Treatment
Under ASC 740 / IAS 12:
- Calculate temporary differences × enacted future tax rates
- Classify current if underlying item current or reversal within 12 months
- Valuation allowance if realization not 'more likely than not' (US) or probable
- Net current DTA/DTL if right of offset
Changes in allowance hit tax expense directly.
Balance Sheet Presentation
Under current assets as:
- 'Current Deferred Taxes Assets'
- 'Deferred Income Taxes - Current'
- Often netted with current deferred tax liabilities
Detailed in tax footnote with rollforward and valuation allowance.
Analytical Implications
- Near-term tax relief (lower future cash taxes)
- Quality of earnings (non-cash benefit)
- Valuation allowance signals skepticism on realization
- Operating losses or accruals driving the asset
- Comparison to liabilities for net tax position
Large valuation allowance reduces effective future benefit.
Key Takeaways
Current Deferred Taxes Assets are short-term future tax savings.
From deductible temporary differences reversing within 12 months.
Common from accruals, reserves, short-term carryforwards.
Valuation allowance if recovery doubtful.
Represent expected reduction in near-term tax payments.
Monitor allowance and reversal timing in tax footnote.
Current Deferred Taxes Assets
Short-Term Future Tax Benefits from Temporary Differences
Current Deferred Taxes Assets represent the portion of deferred tax assets expected to be realized or recovered within the next 12 months or operating cycle. They arise from temporary differences where book expenses exceed taxable expenses (or book income is less than taxable income) in the current period, creating future deductible amounts that will reduce taxable income when they reverse.
Table of Contents
What They Represent
Current Deferred Taxes Assets are future tax savings from deductible temporary differences that will reverse soon.
They reflect situations where you've already recognized more expense (or less income) on the books than on the tax return, so you'll pay less tax when the difference flips.
Distinct from taxes receivable (actual overpayments or refundable credits).
Common Sources
- Accrued expenses not yet tax deductible (warranties, bonuses)
- Inventory reserves or write-downs
- Allowance for doubtful accounts
- Short-term loss carryforwards
- Prepaid expenses deductible for tax but not yet expensed on books
- Revenue deferred for books but recognized for tax (short-term)
Most deferred tax assets from accruals are current if reversal is near-term.
A Quick Example
Company accrues $1 million warranty expense this year (book expense) but can't deduct for tax until claims paid next year.
- Tax rate 25% → $250k deferred tax asset created
- If claims expected next year → classify as current DTA
- Next year: Pay claims → tax deduction → use the $250k benefit to reduce tax payable
Future tax bill drops by the DTA amount when difference reverses.
Accounting Treatment
Under ASC 740 / IAS 12:
- Calculate temporary differences × enacted future tax rates
- Classify current if underlying item current or reversal within 12 months
- Valuation allowance if realization not 'more likely than not' (US) or probable
- Net current DTA/DTL if right of offset
Changes in allowance hit tax expense directly.
Balance Sheet Presentation
Under current assets as:
- 'Current Deferred Taxes Assets'
- 'Deferred Income Taxes - Current'
- Often netted with current deferred tax liabilities
Detailed in tax footnote with rollforward and valuation allowance.
Analytical Implications
- Near-term tax relief (lower future cash taxes)
- Quality of earnings (non-cash benefit)
- Valuation allowance signals skepticism on realization
- Operating losses or accruals driving the asset
- Comparison to liabilities for net tax position
Large valuation allowance reduces effective future benefit.
Key Takeaways
Current Deferred Taxes Assets are short-term future tax savings.
From deductible temporary differences reversing within 12 months.
Common from accruals, reserves, short-term carryforwards.
Valuation allowance if recovery doubtful.
Represent expected reduction in near-term tax payments.
Monitor allowance and reversal timing in tax footnote.
Related Terms
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