ACCA Applied Skills · Financial Reporting · Taxation
Which of the following items gives rise to a taxable temporary difference?
Capitalised development costs already deducted for tax have a carrying amount above their nil tax base, creating a taxable temporary difference. The credit loss allowance and unpaid accruals create deductible differences, and non-deductible entertainment is a permanent difference.
- ATrade receivables that include a general allowance for credit losses not deductible until debts are written off
- BDevelopment costs capitalised as an intangible asset that were deducted in full for tax when incurredCorrect
- CEntertainment expenses that are never deductible for tax
- DAccrued expenses that are tax deductible only when paid
Explanation
Capitalised development costs have a positive carrying amount but a nil tax base because they were already deducted, so the carrying amount exceeds the tax base: a taxable temporary difference. The receivables allowance and unpaid accruals give deductible temporary differences. Non-deductible entertainment is a permanent difference.
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