- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 9. Analysis of Income Taxes
- Subject 4. Temporary versus Permanent Differences
CFA Practice Question
A difference between accounting profit and taxable income without tax consequences is a permanent difference. True or False?
Correct Answer: True
User Contributed Comments 7
| User | Comment |
|---|---|
| examinee | It should be false. What about temporary difference? |
| stefdunk | no, a difference between accounting income and taxable income is permanent. a temporary difference has to do with timing |
| LondonBoy | I'm not sure that is the best way to look at it. I think you should arrive at the answer by thinking that there is a timing differences however as there are no tax consequences the tax difference will not reverse and therefore it is a permanent difference and not a temporary difference. |
| mordja | Yep, agree with LondonBoy |
| vikram59 | london boy is right..the key word here is without tax consequences! |
| boddunah | key word "without tax consequences" |
| johntan1979 | Without tax consequence = No effect from taxes e.g. donation, municipal bond interest |