Income tax expense when interperiod tax allocation is used creates a more stable effective tax rate over time relative to using tax payments as income tax expense.

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Interperiod tax allocation involves allocating income tax expense to periods in which the related income is recognized, rather than just using tax payments as income tax expense. This can lead to a more stable effective tax rate over time because it takes into account the timing differences between when income is recognized and when taxes are paid. Using tax payments as income tax expense can result in fluctuating effective tax rates due to timing differences and changes in tax laws.

Income Tax Expense When Interperiod Tax Allocation Is Used Creates