Question

Explain the difference between intraperiod tax allocation and interperiod tax allocation.

Please answer in essay form

Answer 1

An interperiod tax allocation is the temporary difference between the effects of tax policy on the financial reporting of a business and its normal financial reporting as mandated by an accounting framework, such as GAAP or IFRS.

An intraperiod tax allocation is the allocation of income taxes to different parts of the results appearing in the income statement of a business, so that some line items are stated net of tax.

Interperiod tax allocation invoves four types of transactions that can cause a temporary difference, which are:

• Delayed recognition of taxable income

• Accelerated recognition of taxable income

• Delayed recognition of expenses for tax purposes

• Accelerated recognition of expenses for tax purposes

Intraperiod tax location situation arises in the following cases:

• Continuing operations (results of) are presented net of tax

• Discontinued operations are presented net of tax

• Prior period adjustments are presented net of tax

• The cumulative effect of a change in accounting principle is presented net of