how to calculate a deferred tax asset
say a computer manufacturing company estimates based on past experience that the percentage of computers that will be sent back for warranty repairs in the next year is 2 of the total production if the company s total revenue in year one is 3 000 and the warranty expense in its books is 60 2 x 3 000 then the company s taxable income is 2 940 however most tax authorities do not allow companies to deduct expenses based on expected warranties thus the company is required to pay taxes on the full 3 000 if the tax rate for the company is 30 the difference of 18 60 x 30 between the taxes payable in the income statement and the actual taxes paid to the tax authorities is a deferred tax asset special considerationsthere are some key characteristics of deferred tax assets to consider first starting in the 2018 tax year they could be carried forward indefinitely for most companies but are no longer able to be carried back 4some farming losses may still be carried back for up to two years 5the second thing to consider is how tax rates affect the value of deferred tax assets if the tax rate goes up it works in the company s favor because the assets values also go up this provides a bigger cushion for a larger income but if the tax rate drops the tax asset value also declines this means that the company may not be able to use the whole benefit before the tax day deadline 