Deferred Tax arises due to temporary differences between a company's accounting income (as reported in financial statements) and its taxable income (as assessed under tax laws). When a company recognises revenue or expenses in a different period for tax purposes versus accounting purposes, it creates either a Deferred Tax Asset (future tax savings) or a Deferred Tax Liability (future tax obligation). For investors, a large and growing Deferred Tax Liability can signal that a company's reported profits may be understating its near-term tax burden.
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