Question

Accrued liabilities (severance costs and pension expense) are deferred tax asset or liability?

A. Deferred tax asset
B. Deferred tax liability

Answer 1

Accrued liabilities are most commonly B. deferred tax liabilities because they represent expenses that can be deducted from taxable income in future periods.

Step-by-step explanation:

Accrued liabilities, such as severance costs and pension expense, are most commonly B. Deferred Tax Liabilities.

The reason for this is that when a company accrues for these liabilities, it recognizes an expense on its financial statements, which reduces its taxable income.

This means that the company will be able to deduct the expenses for severance costs and pension payments from its taxable income in future periods.