Because Jab Co. uses different methods to depreciate equipment
for financial statement and income tax purposes, Jab has
temporary differences that will reverse during the next year and
add to taxable income. Deferred income taxes that are based on
these temporary differences should be classified in Jab’s balance
sheet as a

(d) Deferred tax liabilities and assets are classified as
current or noncurrent based on the related asset or liability. A
deferred tax liability or asset is considered to be related to an
asset or liability if reduction of the asset or liability will cause the
temporary difference to reverse. If the deferred tax liability or
asset is not related to any asset or liability, then it is classified
based on the timing of its expected reversal or utilization date.
This deferred tax liability is related to equipment, which is noncurrent,
so the deferred tax liability should also be classified as a
noncurrent liability. Deferred taxes are always classified as assets
or liabilities, rather than as contra accounts.