Explain the reason of creation of deferred tax asset and liability?

the difference between accounting base and tax base create deferred tax but if there is no differense between acounting and tax base no deferred tax required.

To account for the Timing Difference"TD" (TD come in due to different treatment of some assets and liabilities by Tax laws compared to accounting principles). 

Deffered tax liability / assets is a provision for future taxation, asises when taxable income is less than the income showen in the income statement.

The cost of depreciation is the main reason for the difference in the profit as per management income statement and  taxable income statement.

A deferred tax asset is opposite of a deferred tax liability. deferred tax assets are reductions in future taxes payable. ( Prepaid tax ) 

Relevant International Accounting Standard to the accounting for Deferred Taxation is "IAS-12" 

The reason behind creation of deferred tax assets and liabilites is the matching principle of Accounting which states that expense of a period should be matched witht the revenue oft that period. So the ultimate pyrpose of deferred tax is to smoothout profits of a Company.

A deferred tax liability occurs when taxable income is lesser than the income reported on the income statements. This is result of the accounting difference of certain income and expense accounts. This is only a temporary difference. Reason behind deferred tax liability is the use of different depreciation methods for financial reporting and the IRS.A deferred Tax asset is the opposite of a deferred tax liability. Deferred tax assets are reductions in future taxes payable, because the company has already paid the taxes on book income to be recognized in the future e.g a prepaid tax.

To accounts for the difference between accounting base and tax base create deferred tax....T

Deffered tax assets can arise due to net loss carryovers, which are only recorded as assets, if it is deemed to be used in the next fiscal year.

Defferred tax assets/liability is the difference between the accounting value and tax value of the assets or liabilities.

Reason:

1. A company may incur  tax losess and be able to "carry forward" losses to reduce taxable income in future years.

2. a company may accrue an accounting expense in relation to a provision such as bad debts for tax relief upon the provision is utilized.

It is created to adjust temporary differences (also known as timing defferences) that arise due to differences in the tax base and accounting base of assets and liabilities.