You create a book vs. cash tax schedule and figure out what the company owes in taxes based on the Pretax Income on its books, and then you determine what it actually pays in cash taxes based on its NOLs and NEWLY created amortization and DEPRECIATION expenses (from any asset write-ups). Anytime the “cash” tax expense exceeds the “book” tax expense you RECORD this as an decrease to the Deferred Tax Liability on the BALANCE SHEET; if the “book” expense is higher, then you record that as an increase to the DTL.

You create a book vs. cash tax schedule and figure out what the company owes in taxes based on the Pretax Income on its books, and then you determine what it actually pays in cash taxes based on its NOLs and newly created amortization and depreciation expenses (from any asset write-ups). Anytime the “cash” tax expense exceeds the “book” tax expense you record this as an decrease to the Deferred Tax Liability on the Balance Sheet; if the “book” expense is higher, then you record that as an increase to the DTL.