Income taxes are pretty much the hardest part for alotta people. I find that there is not an easy reference point for an initial concept, you have to think on several different planes at once to get it.
The most basic way to put it is this way:
A) if there exists a differential in the reported income for tax purposes and for Financial accounting (GAAP Accounting) purposes there will exist a deferred tax asset or liability.
B) From the perspective of GAAP if more income and therefore taxes are reported for taxation purposes (based on lower expenses for tax reporting purposes) the amount of taxes reported on financial statements will be less in the future. I.e. accurally more expenses were taken immediatly for for GAAP purposes indicating that all else equal, at a later date there will be less taxes reported for GAAP purposes.
Therefore there is a deferred asset. Which may or may not reverse itself, therefore the consideration of a valuation allowance.
The opposite is true for deferred liaibilities, but based upon how likely those liabilities are to reverse themselves we get the treatment of them there in, i.e. as liabilities or as shareholder's equity.
Basically to reference Deferred taxes you have to know it's GAAP concept and it arises based upon a differential in reported expenses for taxation purposes and therefore high/lower income as opposed to the GAAP method.
more income for tax reporting purposes