Flow-through model of income tax reporting in general purpose financial statements had a long history of use in Serbia. It was only in 2004 (and 2003 for banks), when the implementation of deferred taxes model started. It was inevitable, because IAS/IFRS became mandatory basis for preparing financial statements. In this paper we examine quality of deferred taxes disclosures in the financial statements of companies in Serbia. We also documented the most common temporary differences that arise in measuring accounting and taxable income and in that way we identified the major sources of deferred tax. We analyzed the materiality of deferred taxes and their effect on company′s performance in Serbia.