Differences between income statement view and balance sheet view of deferred taxes

Explain to a non-accountant the difference between the “income statement view” and the “balance sheet view” of deferred tax

When the income statement view of deferred taxes is taken, there is a focus on the differences between the accounting profit and and taxable profit i.e. timing differences. This was the view of deferred taxes taken internationally and in UK and USA until the 1990s. The balance sheet view focuses on the difference between the carrying amount of assets and liabilities and their tax bases. It is the method recommended IAS 12.