Accordingly, a deferred tax liability is recognized for the tax effect of this temporary difference. There are three elements of deferred tax asset. There is one element of deferred tax liability. Balances of the deferred tax asset, deferred tax liability and allowance accounts are netted according to their current and noncurrent classification and deferred taxes are presented in one net current amount and one net non-current amount on the balance sheet. See temporary differences of depreciation in Step Three. 6.
Item one reflects the current portion of the income tax benefit reported on the income statement.