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Fundamentals of Tax Accruals |
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Permanent and Temporary Differences
Recall from our Schedule M-1 discussions, many elements work to create differences between book and taxable income. These differences between pretax accounting income (hereafter referred to as book income) and taxable income can be divided into two types: temporary differences and permanent differences.
SFAS 109 (the accounting standard that addresses the tax accrual process) no longer defines the term "permanent difference." However, to ease our explanation and your comprehension of this difficult topic, the term "permanent difference" will be used in this module, as it is still being covered in several intermediate accounting textbooks. In addition, SFAS 109 adopted the word "temporary difference" to replace the word timing difference in the literature. Accordingly, we will use that term throughout the remainder of this lesson.
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Copyright © 1998 Bizzer Professional Training |
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