- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 24. Income Taxes
- Subject 4. Temporary versus Permanent Differences
CFA Practice Question
Which of the following causes a permanent difference between taxable income and accounting profit?
B. MACRS depreciation used for plant assets
C. Interest income on municipal securities
A. Advance collection of revenues
B. MACRS depreciation used for plant assets
C. Interest income on municipal securities
Correct Answer: C
This is an example of a permanent difference since interest on municipal securities is exempt from income (thus, the difference will not reverse in the future).
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