Net Deferred Tax Liabilities

Category

Balance Sheet

Units

Currency

Formula

Deferred Tax Liabilities − Deferred Tax Assets (net of valuation allowance)

US-GAAP elements

DeferredIncomeTaxLiabilitiesNetDeferredTaxLiabilitiesDeferredTaxAssetsLiabilitiesNet

Reference

Regulation S-X Rule 5-02.26 (Deferred credits); ASC 740

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Net deferred tax liabilities are a company's deferred tax liabilities minus its deferred tax assets, after the valuation allowance. The result shows the company's overall deferred tax position: a positive figure means it expects to owe more tax in future years because of past timing differences than it expects to save, and a negative figure means the reverse.

Deferred taxes arise from temporary differences between the income a company reports in its financial statements and the income it reports on its tax returns. Liabilities come from items taxed later than they are booked; assets come from items deducted later than they are expensed, and from unused tax losses and credits.

Deferred taxes are measured under ASC 740 at the enacted rates expected when the differences reverse. On the balance sheet, a company nets its deferred tax assets and liabilities within each tax jurisdiction, and since ASU 2015-17 it classifies all of them as noncurrent. A company with operations in several jurisdictions can therefore show both a deferred tax asset and a deferred tax liability. The net figure combines them. In XBRL filings, the jurisdictionally netted liability is tagged DeferredIncomeTaxLiabilitiesNet, the total net liability before jurisdictional netting is tagged DeferredTaxLiabilities, and a net asset position is tagged DeferredTaxAssetsLiabilitiesNet.

The tax footnote gives the full picture, listing gross deferred tax assets by source, the valuation allowance, and gross deferred tax liabilities by source, and arriving at the net position. Regulation S-X Rule 5-02.26 requires deferred income taxes to be shown separately among deferred credits on the balance sheet.

Analysts use the net position to judge how much of a company's tax burden has been postponed. A large net liability driven by accelerated depreciation at a company that keeps investing may never fully reverse, so it behaves more like permanent financing than a debt coming due. A large net asset built on loss carryforwards is only worth something if the company becomes profitable enough to use it. The year-over-year change in the net position is closely related to the deferred tax expense on the income statement.