Book-Tax Difference
/ˈbʊk tæks ˈdɪf(ə)rəns/
Definitions
- (n.) The discrepancy between taxable income reported on tax returns and accounting income reported on financial statements due to differing rules and principles.
The company’s book-tax difference resulted from accelerated depreciation allowed for tax but not for accounting purposes.
Forms
- book-tax difference
- book-tax differences
Related terms
See also
Commentary
Book-tax differences arise because financial accounting follows generally accepted accounting principles (GAAP), whereas tax accounting follows statutory tax law; recognizing these differences is essential for calculating deferred tax items.
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