Meaning and example
Deferred tax reflects the IAS 12 consequences of temporary differences between carrying amount and tax base, as well as certain unused tax losses and tax credits. Recognition of deferred tax assets is subject to conditions and exceptions. Source: **curr-stat-ias12**, About.
Different depreciation schedules for equipment in accounting and tax records can create a temporary difference. Its recognition does not mean that the same amount of money has already been paid or received. Current tax, the deferred component and the cash settlement must be read separately.
Limits of interpretation
Do not declare every past loss to be an unconditional tax asset. The possibility of using it under the applicable requirements matters. When assessing the result, check whether a change in net profit is explained by revised tax expectations rather than improved operating performance. Related reading: [financial statements roadmap](/guides/financial-statements-roadmap/) and [balance sheet](/guides/balance-sheet/).