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Basic Question 7 of 13
In the absence of temporary differences, there should be no difference between income tax expense and income tax payable. True or False?
User Contributed Comments 16
| User | Comment |
|---|---|
| kalps | In the absence of temporary differences there should be no differnce between income tax payable and income tax expense. |
| blumonster | ?? but there could be permanent diff which cause income tax expense to be diff from tax payable |
| i020757 | i think permanent diff only result diff in financial income & taxable income. |
| i020757 | agree with you, how about permanent diff?? |
| Nancyz | Tax expense = tax payable +/- net change of deferred tax liability/asset. Since there is no temporary difference, there would be no deferred tax liability/asset. Therefore, tax expense = tax payable. Permanent different only result in difference between the effective tax rate and the statutory tax rate. |
| danlan | If there is permanent difference, do we use effective tax rate or statutory tax rate? |
| mtcfa | I don't like the question. If there is a permanent difference, tax expense will not equal taxes payable in the year of the event. |
| gnja | tax expense and taxes payable should equal because as said earlier permanent diff only result in diff bet eff tax rate and statutory tax rate. thus, if you multiply the effective tax rate (considering permanent diff) with the financial income, the tax expense should equal taxes payable (if there are no deferrals) |
| o123 | mtcfa...they will be equal. The permenant diff will show up in the statements due to a pretax income (I/S) which will be different [permenantly] than the corresponding taxable income (Tax Return). |
| Khadria | Permanent difference will cause to deduct the extra income from the revenue and hence the taxable (or pretax) income will remain the same. |
| steved333 | Khadria puts it best, I think. Good point. I can remember that (I hope) |
| boddunah | permanent diff. dont create DTL and DTA. Tax credits directly reduce taxes payable. |
| johntan1979 | Nancyz nailed it. The equation holds true, regardless of how you argue it. Tax expense = Tax payable + DTL Tax expense + DTA = Tax payable No DTL or DTA: Tax expense = Tax payable |
| Seancfa1 | Thank-you Nancyz and Johntan1979. |
| tayhorvat | If I pass it is soley because of johtan1979. Thank you for all your explanations |
| Freddie33 | ^Johntan is my savio |
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Learning Outcome Statements
explain how deferred tax liabilities and assets are created and the factors that determine how a company's deferred tax liabilities and assets should be treated for the purposes of financial analysis
CFA® 2025 Level I Curriculum, Volume 3, Module 9.