Deferred tax asset
A deferred tax asset is the future tax saving from deductible temporary differences and carryforwards. It arises when book income exceeds taxable income later, such as with accrued warranty costs.
It is measured at the enacted tax rate expected to apply, and reduced by a valuation allowance if it is more likely than not that some of it will not be realized.
Example. A company accrues $100,000 of warranty expense that is deductible only when paid. At a 21% rate it records a $21,000 deferred tax asset.
By Binod Raj Singh, CPA (licensed in Montana) · Updated for the 2026-2027 exam windows · Last updated 2026-11-05