CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following will not result in deferred taxes?

A. Including municipal bond interest for financial reporting but not for the tax return
B. Different depreciation methods for the tax return and financial reporting
C. Different accounting methods for warranty expense for the tax return and financial reporting
D. Different accounting methods for service contracts for the tax return and financial reporting
Correct Answer: A

Municipal bond interest is recognized as income for financial reporting but not for the tax return, resulting in a permanent difference. Permanent differences do not result in deferred taxes.

User Contributed Comments 4

User Comment
kalps Municipal bond interest is exempt I assume ? It results in a permanent difference
sarath Municipal bond interest is recognized as income for financial reporting and not for tax return. So it results in permanent difference. No deferred taxes...
mirfanrana permanent differences do not result in deffered taxes.
Khadria However, capital gains that occur when the bond is sold or at the time of maturity (if the bond was bought at a discount) are not exempt from any taxes.
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