Deferred Taxes

Represents the increase/decrease in non-current deferred taxes for the period.

Benefit

Companies are experts when it comes to dodging taxes. While they jack up their profits in their annual report to shareholders, they reduce profits any way they can in their filings with the IRS—kind of like trashing your home just before the tax agent knocks. As a result, the tax payments a company reports on its income statement are often very different (and usually much higher) than the taxes the company actually pays. The company pockets the difference, which is why it shows up on the cash flow statement. Note: This difference pocketed by the company is called "deferred taxes because, technically at least, the company will have to pay the difference to the IRS at some point in the future. In other words, the company "defers the taxes.

Origin

The current amount of deferred taxes is found in the company’s cash-flow statement. The change in deferred taxes from one period to the next is found on the company’s cash-flow statement.