Temporary Difference
Accounting glossary · Understand, connect, apply
A temporary difference is the gap between an asset or liability’s carrying amount and its tax base. It can lead to taxable or deductible amounts when the item is recovered or settled.
Example
A machine has a carrying amount of 70,000 and a tax base of 50,000. On the stated assumptions, the 20,000 gap is a taxable temporary difference.
Remember the difference
Distinguish temporary differences from income or expenses that will never enter the tax calculation. Recognition exceptions and recoverability tests can affect the deferred tax recorded.
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Published 9 November 2026. Prepared with AI assistance. Examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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