Working with Temporary Differences

Temporary differences between the book and tax basis will reverse, and therefore impact taxable income at some point in the future. Some examples of temporary differences are Accumulated tax depreciation in excess of book depreciation, Allowance for Bad Debt, or Other Reserves.

During system setup, implementation, or as part of your on-going tax reporting, you’ll add and configure accounts for Temporary differences. Temporary differences include all differences between the tax and financial reporting bases of assets and liabilities, if those differences will result in taxable or deductible amounts in future years.

Common timing differences include those relating to depreciation methods, deferred compensation plans, contracts, bad debts, and so on.

These amounts are stored in members of the account dimension under the following categories:

  • TRCS_TempGSTotal
  • TRCS_TempSTTotal

When reconciling Temporary Differences at the National level note that differences can exist when reconciling from a reporting standard to a statutory standard, or when reconciling from the statutory standard to a tax reporting standard. For example, say your reporting standard is IFRS and the tax return basis in the U.K. is UK GAAP. Any Temporary differences would be entered in accounts under the GAAP to Stat Parent. Reconciling from UK GAAP to taxable income, these Temporary differences are entered under the Stat to Tax Parent.

Watch this tutorial video for information on Temporary Differences: Video icon Configuring Temporary Differences in Tax Reporting Cloud