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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

QualificationExamRelationshipPeriod
ACCA FR Direct September 2026–June 2027
ACCA SBR Direct September 2026–June 2027