respond to: A temporary difference arises any time there is a difference between book income...
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respond to: A temporary difference arises any time there is a difference between book income and taxable income Revsine etal This happens when book income is either greater or less than what a company's taxable income will initially be However, eventually, another recording will eventually reverse the initial recording. A common example of this is when companies offer a multiyear subscription plan for their services or goods. An example of this would be when Adobe sells a two subscription for its Photoshop platform. The customer will pay the $ dollars at the time they sign up for the subscription to retain access to the software for the next two years. In this particular case, the companys book income will be accrued over the subsequent months throughout the duration of the subscription plan. However, for tax purposes, the company will have to report the entire amount of revenue earned as taxable income for the year in which the subscription plan was subscribed to Since the subscription is prepaid up front the company's taxable income will be higher than its book income. As the income is accrued over the life of the subscription the difference will be offset and canceled out.
respond to: A temporary difference arises any time there is a difference between book income and taxable income Revsine etal This happens when book income is either greater or less than what a company's taxable income will initially be However, eventually, another recording will eventually reverse the initial recording. A common example of this is when companies offer a multiyear subscription plan for their services or goods. An example of this would be when Adobe sells a two subscription for its Photoshop platform. The customer will pay the $ dollars at the time they sign up for the subscription to retain access to the software for the next two years. In this particular case, the companys book income will be accrued over the subsequent months throughout the duration of the subscription plan. However, for tax purposes, the company will have to report the entire amount of revenue earned as taxable income for the year in which the subscription plan was subscribed to Since the subscription is prepaid up front the company's taxable income will be higher than its book income. As the income is accrued over the life of the subscription the difference will be offset and canceled out.
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