All the following transactions lead to temporary timing differences except:
A) the use of estimated warranty costs for calculating warranty expense
B) the use of straight-line amortization for accounting purposes
C) the recognition of dividend income for dividends received from another Canadian company
D) The use of provisions for gift card sales

Question

Quizplus · Accepted Answer

Temporary timing differences arise when there is a difference in the timing of when income or expenses are recognized for accounting purposes versus tax purposes. The recognition of dividend income for dividends received from another Canadian company does not lead to a temporary timing difference because, under certain conditions, such dividends may be received tax-free by the receiving corporation, thus not creating a timing difference between accounting and tax treatments. The other options (A, B, D) involve situations where the recognition or measurement of income/expenses differs between accounting and tax purposes, leading to temporary differences that will reverse in future periods.

All the Following Transactions Lead to Temporary Timing Differences Except