Final answer:
Deferred tax assets and liabilities are classified as non-current assets and liabilities on the balance sheet. Assets are future tax benefits and liabilities are future tax obligations.
Step-by-step explanation:
Deferred Tax Assets and Liabilities on the Balance Sheet
Under both IFRS and US GAAP, deferred tax assets and liabilities are classified as non-current assets and liabilities on the balance sheet. They are presented separately from current assets and liabilities.
Deferred Tax Assets
Deferred tax assets represent future tax benefits that a company expects to receive due to temporary differences between taxable income and accounting income. These assets are created when a company pays more in taxes in the current period than the amount recognized for financial reporting purposes. Examples of deferred tax assets include tax loss carryforwards, unused tax credits, and temporary differences related to depreciation.
Deferred Tax Liabilities
Deferred tax liabilities represent future tax obligations that a company expects to pay due to temporary differences between taxable income and accounting income. These liabilities are created when a company pays less in taxes in the current period than the amount recognized for financial reporting purposes. Examples of deferred tax liabilities include temporary differences related to accelerated depreciation and inventory valuation methods.