Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 14

Deferred income tax liability The difference between the amounts of book and tax depreciation expense, as well as the desire to report income tax expense that is related to book income before taxes, causes a long-term deferred income tax liability to be reported on the balance sheet. The amount of this liability reported on the balance sheets of many firms has been increasing over the years, creating the impression that the liability will never be paid. Why has the amount of the deferred income tax liability risen steadily for many firms?