A taxable temporary difference produces taxable amounts in future periods when the related book asset is recovered or liability is settled. It supports a deferred tax liability unless a specific recognition exception applies. Current return adjustments and the ending future difference are related but are not the same number.
Trace the future taxable amount
ASC 740-10-25-23 identifies temporary differences that yield future taxable amounts on recovery or settlement.
If equipment has a $700,000 carrying amount and $400,000 supported tax basis, recovery creates a $300,000 taxable temporary difference. At a 21 percent enacted reversal rate, it produces a $63,000 gross deferred tax liability. Current excess tax depreciation may explain the year's origin, but the ending balance controls deferred measurement. Document reversal period, character, jurisdiction, and exception research. The familiar asset pattern is a diagnostic, not a substitute for supported tax consequences.
A final cross-check ties the difference-level amount to the gross deferred-liability rollforward before statement netting.
Put the concept to work
Apply this concept
- Measure a supplied taxable temporary difference at the enacted rate for its expected reversal period and connect it to the deferred tax liability.
Learning resources
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