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CFA Level 1 Question of the Week - Financial Reporting and Analysis

Matt_AnalystPrepMatt_AnalystPrep MontrealPosts: 141 Associate
edited July 2017 in Level 1 Questions
Which of the following will most likely result in a permanent difference between taxable income and pre-tax income?

CFA Level 1 Question of the Week - Financial Reporting and Analysis 6 votes

A. A firm deducts warranty expenses from its income statement but does not deduct them from its tax statements until the receivables are deemed worthless.
0% 0 votes
B. A firm enjoys tax credits on the imports of certain medicines.
50% 3 votes
C. A firm uses different methods of depreciation for reporting purposes and tax purposes.
50% 3 votes

Comments

  • Matt_AnalystPrepMatt_AnalystPrep MontrealPosts: 141 Associate
    The tax credits will most likely result in a permanent difference between pre-tax income and taxable income as the tax credits are not expected to reverse in the future.

    Warranty expenses and differences in depreciation methods result in temporary differences as they are expected to reverse in the future. 
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