Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are true?
A)Some of the differences may arise because of permanent differences (items that affect income for financial reporting but never affect taxable income, or vice versa).
B)Some of the differences may arise because of temporary differences (items that affect income for financial reporting in a different period than for tax reporting).
C)The difference between income tax expense and income tax payable represents the tax effects of temporary differences: either the firm will receive future benefits (deferred tax assets) or it must pay future taxes (deferred tax liabilities).
D)U.S.GAAP and IFRS require firms to measure income tax expense based on income for financial reporting (excluding permanent differences) and the income tax authorities impose taxes on taxable income.
E)all of the above

Question

Quizplus · Accepted Answer

All of the statements are true. Differences between financial reporting income and taxable income arise due to both permanent differences and temporary differences. The difference between income tax expense and income tax payable represents the tax effects of temporary differences, which result in either deferred tax assets or deferred tax liabilities. Both U.S. GAAP and IFRS require firms to measure income tax expense based on income for financial reporting, excluding permanent differences, while the tax authorities impose taxes on taxable income.

Income Before Taxes for Financial Reporting Usually Differs from Taxable