Abstract This article focuses on a financial statement analysis approach to deferred taxes in the U.S. The timing differences between reported income and taxable income give rise to deferred tax liabilities. A firm has no present obligation for income taxes that may appear in its future income tax returns, and reported taxes should follow the tax return. The effect of deferred taxes on the financial statements, net income and the debt to equity ratio.
Jeter et al. (1988) studied this question.