Deferred Tax Assets

Next Previous Up Top

In accounting, tax is deferred when a transaction that occurs in one period causes a change in tax liability in a later period.

• Suppose a company sells stock of 100,000,000 yen and purchases a building. The stock as such is not taxed, the building is subject to real estate tax. The future taxes are deferred taxes, they are a liability, and reduce equity.
• A recent paper by a professor at the U. Chicago business school argues that recent changes (1998) in accounting rules for "deferred tax assets" had the primary effect of allowing Japanese banks to appear to be solvent.
• In 2002, net DTAs accounted for 60% of major banks' equity.
• In 2003, Resona collapsed because it wasn't allowed to claim huge net DTAs in its report.
• In 2005 Sumitomo Mitsui Financial Group's net DTAs accounted for 49% of its equity, affecting the evaluations of its bid for UFJ.

Next Previous Up Top