Long-Term Income Tax Obligations

As I mention in the Tax Accounting System section, your company uses quite different standards, rules and principles for its financial reporting to shareholders and management and for its corporate income tax filing with IRS and equivalent tax authorities in other nations.

As the results, it sometimes happens that your company accrues corporate income tax liability according to its financial accounting rules, but does not have to actually pay the corresponding amount of tax for a long time (years). In this case the corresponding amount of deferred taxes shows up on your balance sheet in the ‘Long-Term Income Tax Obligations’ account, sometimes called ‘Deferred Income Tax Liability’.

In other words, although your company has already recognized the income on its books, the ‘tax man’ lets it pay the taxes later. It identifies taxes that the company "should" have paid by now but hasn't because of differences between accounting rules and tax law.

Again, this is just an accounting gimmick, not very useful for financial analysis and financial valuation purposes as the latter is concerned with actual cash inflows and outflows, not with accounting accruals.