Temporary difference
Taxable temporary differences generate taxable amounts when the carrying amount is recovered or settled; deductible temporary differences generate deductible amounts. Calculate deferred tax using the applicable future tax rate and recognition rules, including IAS 12 exceptions and the recoverability requirement for deferred tax assets. A permanent difference between accounting and taxable profit does not create a deferred tax amount merely because it affects the tax reconciliation.
Worked example
An asset has carrying amount $100,000 and tax base $80,000. Its $20,000 taxable temporary difference produces a deferred tax liability of $5,000 at 25%, assuming no exception applies.
Common mistake
Calling the $20,000 difference itself the tax liability, or treating non-deductible expenses as temporary differences automatically.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |
