Deferred Tax Liability (DTL)
What it is:
How it works (Example):
Why it Matters:
For investors and analysts, the most important question to ask about DTL is, "Will it reverse in the future, and if so, when?" For example, if the DTL is expected to decrease, the company will need to make an actual tax payment to the government and its cash account will decrease.
In general, the difference between taxes owed and taxes paid will reverse themselves over time. Only in rare cases will DTL persist or grow.