Discussion Topic: Permanent versus Temporary Differences Between Accounting and Taxable Incomes

Companies must follow the FASB in the United States for accounting income determination but follow the IRS tax rules and regulations for their tax returns. Sometimes these do not agree. When they do not, permanent and temporary timing differences arise.

What is the difference between a temporary and a permanent difference? Are there good and bad temporary differences? That is$,$ do some companies pay less income taxes now compared to their income tax expense on the income statement, while others require you to pay more income taxes now compared to their income tax expense? Can you provide an example or two of each kind of temporary difference?

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Your postings should be qualitative and provide substantive depth that advances the discussion.

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