LokiDog2

I think I kind of grasp it now. I understand the formula, I was just trying to grasp it conceptually.

So assuming a company has NI of $1MM and a effective tax rate of 30%, their tax expense will be 300k. The interest payable will be the amount they actually distribute to the govt. If this amount is less, then they have a deferred tax liability and vice versa for a deferred tax asset. My question is why would they ever overpay taxes in order to create a deferred tax asset?

Please correct me if I am wrong about the logic.

Thanks for the responses guys.