Analyzing Tax Expense

Crestview Holdings reported the following in its 2015 financial statements.

$ millions 2015 2014

Total deferred tax assets $843 $764

Total deferred tax liabilities 4,211 3,126

Current provision for income taxes 1,427 134

Compute the deferred tax expense for the company for 2015.

Deferred tax expense in 2015 is $1,006 million

Explanation:

It is imperative to calculate the actual deferred tax liabilities in each year before proceeding to compute the deferred tax expense for 2015.

Tax year 2014

Total deferred tax liabilities $3,126

less; deferred tax asset ($764)

Actual deferred tax liabilities $2,362

Tax year 2015

Total deferred tax liabilities $4,211

less; deferred tax asset ($843)

Actual deferred tax liabilities $3368

The deferred tax expense for the year 2015 is the increase in actual deferred tax liabilities in 2015 that $1,006 million ($3368-$2,362)

As result there would be a charge for deferred tax liabilities of $1,006 million in the year 2015