Tax expense equals taxes paid
Definition: Income tax expense on the income statement includes both current tax (payable now) and deferred tax (future tax consequences of temporary differenc…
Reality
Income tax expense on the income statement includes both current tax (payable now) and deferred tax (future tax consequences of temporary differences). Cash taxes paid can differ significantly from book tax expense.
Why It MattersUnderstanding why "tax expense equals taxes paid" is a misconception helps avoid analytical errors and improper financial decision-making.
CategoryTax
External Links
- Deferred tax — Wikipedia