The difference between the carrying amount of an asset or liability in the balance sheet and its tax base is a temporary difference.

Question

Quizplus · Accepted Answer

This is correct according to accounting standards, where temporary differences arise when there are differences between the carrying amount of an asset or liability for financial reporting purposes and its tax base, which is the amount attributed to that asset or liability for tax purposes. These temporary differences are expected to reverse in the future and result in taxable or deductible amounts in subsequent periods.

The Difference Between the Carrying Amount of an Asset or Liability