Examples of Temporary Differences under Income Tax Accounting:
Taxable Revenues Later = Deferred Tax Liability
[ICE-GI]
1. Installment Sales
2. Contractors Accounting (Percentage of Completion vs. Completed Method)
3. Equity Method (Undistributed dividends) for Book and cost method for Tax.
4. G – Gains > Unrealized holding gains under Book (including the FV option), but deferred under Tax.
5. Involuntary conversion of nonmonetary asset which is recognized under Book but deferred for Tax
Deductible Expenses Now = Deferred Tax Liability
[ADD-P]
1. Amortization of Franchise
2. Depreciable Property
3. Depletable Resources
4. Prepaid expenses that are deducted on the tax return in the period paid
Deductible Expenses Later = Deferred Tax Asset
[BLUES-W]
1. Bad Debts Expense (Allowance vs. Direct Write-Off)
2. Litigation accruals
3. Unrealized holding losses under Book (including the use of FV option) but deferred under Tax.
4. Estimated liabilities related to discontinued operations or restructurings
5. Stock-Based Compensation Expense
6. Warranty Liabilities
Taxable Revenues Now = Deferred Tax Asset
[SPS]
1. Subscriptions Received in Advance
2. Prepaid Rent/Interest/Royalties/Contracts
3. Sales and leasebacks under Book (income deferral) but reported as sales under Tax
.