Tax expense consists of current tax expense and deferred tax expense.
The balance sheet liability method accounts for all temporary differences. All timing differences under the income statement liability method are generally temporary differences. Deferred tax expense arises when asset and liability amounts differ between financial reporting and tax base purposes. The tax base of an asset is the amount deductible for tax purposes against any taxable economic benefits gained when the assets are utilized. The tax base of a liability is the liability s carrying amount, less any amount deductible for tax purposes with respect to that liability.