CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

The taxable income of a corporation ______

I. differs from accounting income due to differences in interperiod allocation and permanent differences between the two methods of income determination.
II. is based on generally accepted accounting principles.
III. is reported on the corporation's income statement.
IV. differs from accounting income due to differences in intraperiod allocation between the two methods of income determination.
Correct Answer: I

One objective of financial statement users and preparers is to measure net income according to GAAP. The objective of the Income Tax Regulations is to generate revenue for the government. There are some differences between GAAP and the Income Tax Regulations.

User Contributed Comments 4

User Comment
kalps Taxable income differes bewteen inland revenue and financial statements becos: 1) Differences in interperiod allocation 2) Permanenet difference (arise from different objectives of the IRS and the company)
mtcfa Is interperiod allocation another way of saying temporary differences? I did not see this term used in the text.
thud I think it's the "timing difference" used in the text.
thekapila INTRA PERIOD: Distribution of tax for the current year in different parts of the financial statements. For example, tax expense is shown on income before tax, cumulative effect of a change in principal net of tax, extraordinary items net of tax, prior period adjustments net of tax.

Interperiod: Timing difference between years in which a transaction affects taxable income and accounting (book) income. Temporary differences originate in one period and subsequently reverse in another.
You need to log in first to add your comment.