Deductible temporary difference definition
/What is a Deductible Temporary Difference?
A deductible temporary difference is a temporary difference that will yield amounts that can be deducted in the future when determining taxable profit or loss. A temporary difference is the difference between the carrying amount of an asset or liability in the balance sheet and its tax base. A deferred tax asset is recognized for all deductible temporary differences if it is probable that a taxable profit will be available that will be offset against the deductible differences.
Example of a Deductible Temporary Difference
In its most recent year of operations, Table Furniture earns $250,000. Table also has $30,000 of taxable temporary differences and $80,000 of deductible temporary differences. Based on this information, Table’s taxable income in the current year is calculated as follows:
$250,000 Profit - $30,000 Taxable temporary differences + $80,000 Deductible temporary differences
= $300,000 Taxable profit