In financial statements analysis and particularly in Solvency analysis and for analytical purposes; we should consider deferred taxes as what?

In a going concern the actual payment of deferred tax relating to temporary differences between the tax and accounting recognition of income, even though reflected as a liability or asset, is continually postponed by new tempory differences. In such a case deferred tax should be considered as part of equity by management.

If the going concern of a firm is in doubt deferred tax balances may need to be settled in the near future and should be treated as an asset or liability as calculated.

 

During capital Structure analysis and as apart of financial statements analysis raises an important question is whether we treat deferred taxes as a liability, as equity, or as part debt and part equity! Our answer depends on the nature of the deferrel, past experience of the account, and the likelihood of future reversals. In reaching our decision, we must recognize that, under normal circumstances, deferred taxes reverse and become payable when a company's size declines. To the extent future reversals are a remote possibility, as conceivable with timing differences from accelerated depreciation, deferred taxes should be viewed like long-term financing and treated like equity. However, if the likelihood of a drawing down of deferred taxes in the foreseeable future is high, then deferred taxes or part of them should be treated like long-term liability. :)

Deferred tax is used to match the tax effects of transactions with their accounting impact. so consider deferred tax as a long term liability.