Deferred taxes

These are not a specific type of tax, but items carried in the normal financial statements prepared for accounting purposes - as opposed to those drawn up for tax purposes. They are established when timing differences arise between tax-related charges or entitlements reported in accordance with commercial accounting rules (e.g. IFRS) and those reported in the same year´s tax statements. Deferred tax items - whether assets or liabilities - correct the actual tax charge assessed for the period to provide a true and fair view of the company´s assets and liabilities. Deferred tax assets are the amounts of income taxes deemed to be recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits. Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.
The prime objective of deferred tax accounting is to show a tax charge in the commercial (or IFRS) financial statements which is appropriately related to the earnings before taxes reported for the year. However, deferred tax items can only be reported if the established timing differences are expected to reverse in the foreseeable future (i.e., if they class as temporary differences).