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Deferred tax expense

Changes in deferred tax assets and liabilities arise for several reasons, including temporary differences, tax losses and changes in tax rates or recognition assessments. The tax consequence is generally recognised in profit or loss except where the related transaction or event is recognised outside profit or loss, or in a business combination. A net liability increase alone is not necessarily the profit-or-loss tax charge.

Worked example

A taxable temporary difference increases by $20,000 due to depreciation recognised in profit or loss; the tax rate is 25% and no exceptions apply. Recognise an additional $5,000 deferred tax liability and $5,000 deferred tax expense in profit or loss.

Common mistake

Assuming every increase in a deferred tax liability is charged to profit or loss: tax on an OCI revaluation may also be recognised in OCI.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA FR Direct September 2026–June 2027
ACCA SBR Direct September 2026–June 2027