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CMA Part 1
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1. External financial reporting decisions
2. Planning, budgeting, and forecasting
3. Performance management
4. Cost management
5. Internal control
6. Technology and analytics
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1.2.8.1 Learning outcomes
Achievable CMA Part 1
1. External financial reporting decisions
1.2. Financial transactions
1.2.8. Income taxes
Our CMA Part 1 course is currently in development and is a work-in-progress.

Learning outcomes

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The learning outcome statements related to income taxes are as follows:

  1. Demonstrate an understanding of interperiod tax allocation/deferred income taxes
  2. Distinguish between deferred tax liabilities and deferred tax assets
  3. Differentiate between temporary differences and permanent differences, and identify examples of each

Accounting for income taxes is covered by ASC 740.

Interperiod tax allocation / Deferred income taxes

  • Matches income tax expense to accounting income, not tax return income
  • Recognizes deferred tax assets and liabilities for future tax effects of current transactions
  • Governed by ASC 740

Deferred tax liabilities vs. deferred tax assets

  • Deferred tax liabilities: future taxable amounts, taxes payable in future periods
  • Deferred tax assets: future deductible amounts, reduce future tax payments
  • Created by timing differences between book and tax income

Temporary differences vs. permanent differences

  • Temporary differences: reverse over time, cause deferred tax items
    • Examples: depreciation methods, warranty expenses
  • Permanent differences: never reverse, no deferred tax impact
    • Examples: fines, nondeductible expenses, tax-exempt interest
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Next  | 1.2.8.2 Income taxes and interperiod tax allocations
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Learning outcomes

The learning outcome statements related to income taxes are as follows:

  1. Demonstrate an understanding of interperiod tax allocation/deferred income taxes
  2. Distinguish between deferred tax liabilities and deferred tax assets
  3. Differentiate between temporary differences and permanent differences, and identify examples of each

Accounting for income taxes is covered by ASC 740.

Key points

Interperiod tax allocation / Deferred income taxes

  • Matches income tax expense to accounting income, not tax return income
  • Recognizes deferred tax assets and liabilities for future tax effects of current transactions
  • Governed by ASC 740

Deferred tax liabilities vs. deferred tax assets

  • Deferred tax liabilities: future taxable amounts, taxes payable in future periods
  • Deferred tax assets: future deductible amounts, reduce future tax payments
  • Created by timing differences between book and tax income

Temporary differences vs. permanent differences

  • Temporary differences: reverse over time, cause deferred tax items
    • Examples: depreciation methods, warranty expenses
  • Permanent differences: never reverse, no deferred tax impact
    • Examples: fines, nondeductible expenses, tax-exempt interest

More from Income taxes

  • Income taxes and interperiod tax allocations
  • Deferred tax liabilities
  • Deferred tax assets
  • Permanent differences
  • Other topics