What is the purpose of deferred tax assets and liabilities? What do they represent and how do they affect tax expense. Do you think recording deferred tax assets/liabilities helps the readers of the financial statements better understand a company’s tax position? Why or why not? Solution Deferred Tax Assets and Deferred Tax Liabilities arise due to the timing/Temporary differences.Concept of Deferred Tax Asset and Liabilities is prescirbed by IAS Income TAxes. Temporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its tax base.purpose of deferred tax assets and liabilities is better accounting treatment of taxes and better presentation of Financial Statements. A deferred tax asset shall be recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized.In simple words if we have paid tax more than the tax payable as per accounting income then deffered tax asset will be created. Deferred tax liabilities generally arise where tax relief is provided in advance of an accounting expense/unpaid liabilities, or income is accrued but not taxed until received.In simple words if we have paid tax less than the tax payable as per accounting income then deffered tax liability will be created. Yes, recording deferred tax assets/liabilities helps the readers of the financial statements better understand a company’s tax position. Since the investors would be able to know the exact position of the company on that date. If company does not show them then readers wont be able to know the more/less requirement of tax in future years due to current/ previous years. .