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Although a majority of income and deduction items encountered by a business enterprise are treated identically for financial reporting and tax purposes, there are a number of items that are treated differently.  They are known as book-tax differences and are classified as either temporary or permanent

This course covers permanent differences, including:

  • How to identify and account for permanent differences
    • Permanent differences are book items that never affect the taxable income computation, or vice versa. 
    • Permanent differences result in an increase (decrease) in the corporation’s effective tax rate (ETR).
  • How to read and understand the balance sheet footnote which computes the corporation’s ETR. 
  • How to prepare the journal entry to record the income tax expense (also called the income tax provision) net of the tax saving (cost) from permanent differences. 

 

Note:  temporary differences are covered in another Illumeo course and should be taken before this course. 

Course Series

This course is included in the following series:

2 CoursesAccounting for Differences in Financial and Taxable Income

  1. Accounting for Temporary Differences In Financial and Taxable Income
  2. Accounting for Permanent Differences In Financial and Taxable Income

Learning Objectives

  • Identify permanent difference and how is it computed
  • Identify Tax-exempt income
  • Identify Nondeductible expenses
  • Recognize what is the impact of permanent differences on the financial tax expense
  • Recognize what is the effective tax rate and how is it computed.
Last updated/reviewed: January 28, 2018

10 Reviews (67 ratings)Reviews

4
Member's Profile
Good overview with specific examples. Could have skipped GE example as it is more confusing than anything unless there is more explanation of differences.
4
Member's Profile
Very relevant content. However, the final exam included questions that included ambiguous wording. Even after passing on the 3rd try, I would likel to know which of the five questions was answered incorrectly.
4
Member's Profile
Good examples and overview of the material. The case study helped apply all concepts.
3
Member's Profile
It may need more explanations. good introduction to the tax differences
5
Member's Profile
Tough and very thorough. I appreciate how detailed your slides are.
4
Anonymous Author
Great introduction to permanent differences!
4
Anonymous Author
Good overview and reminders.
5
Member's Profile
This a great course
5
Anonymous Author
Very informative
4
Member's Profile
Done

Prerequisites

Course Complexity: Intermediate

Prerequisite: Exposure to accounting for income taxes

 

Advanced Preparation: None

 

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
Accounting for Permanent Differences
  15:57Book-Tax Differences
  16:17Current Tax Provision
  17:29Disclosures
Conclusion
  2:47Course Conclusion
Continuous Play
  54:38Accounting for Permanent Differences In Financial and Taxable Income
SUPPORTING MATERIALS
  PDFSlides: Accounting for Permanent Differences
  PDFAccounting for Permanent Differences Glossary Index
REVIEW & TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM