Skip to content

CFA Level I · CFA Level I Exam · Analysis of Income Taxes

Which of the following best describes taxable income?

Taxable income is the income figure calculated under the tax authority's rules, and it is the base on which income tax payable for the period is computed. It differs from accounting profit before tax because tax and accounting rules recognise some revenues and expenses differently.

  1. AProfit before tax shown in the financial statements prepared under IFRS
  2. BThe income figure on which income tax payable is calculated under the tax authority's rulesCorrect
  3. CThe income figure used to compute the deferred tax expense recognised in the income statement

Explanation

Taxable income is the profit measure determined under tax regulations and is the base on which income tax payable is computed. Accounting profit before tax is determined under IFRS and may differ because of differences in recognition rules. Deferred tax arises from those differences but is not the base for tax payable.

Did you get it right without looking?

One question tells you little. A timed set on Analysis of Income Taxes shows your real accuracy, how long you take and where you lose marks.

Practise Analysis of Income TaxesFree diagnostic mock

More Analysis of Income Taxes questions