Permanent and Temporary Differences

Permanent and temporary differences are categorized into two categories to account for the differences between GAAP and Statutory reporting requirements of entities:

• GAAP to Statutory adjustments

• Statutory to Tax adjustments

For some legal entities, the local tax regulations require a different basis of accounting from those of the parent. These entities use GAAP to Stat adjustments.

Entities that do not use or do not have GAAP to Statutory permanent or temporary differences (entities for which reporting standards and local tax regulations are the same) can use the Statutory to Tax permanent and temporary differences sections.

Temporary differences may be classified as current or noncurrent for purposes of determining the correct Balance Sheet classification.

The permanent and temporary difference amounts can be manually input or automated. The manual inputs also include adjustments to the automatically calculated values that may be needed.

Equity Permanent Differences:

An account setting for equity permanent difference accounts provides for an adjustment to taxable income and a corresponding reversing adjustment on a tax effected basis resulting in no impact to current tax charge and the ETR report on a net basis.

Equity Temporary Differences:

An account setting for equity temporary difference accounts provides for an adjustment to taxable income and a corresponding reversing adjustment on a tax effected basis resulting in no impact to current tax charge. The current year movement in deferred tax is treated as an equity (i.e. balance sheet) movement resulting in no impact to deferred tax charge.