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Tax

2.2 Calculating temporary differences

Deferred tax is calculated by comparing the carrying amount of an asset or liability to
its tax base.

The tax base of an asset or liability is its value for tax purposes.

It is important to consider whether the carrying amount or the tax base is bigger:

Carrying amount > Carrying amount <
Tax base Tax base
(a taxable difference) (a deductible difference)

Deferred tax liability Deferred tax asset

Illustrations and further practice

Now try TYU question 1 from Chapter 12

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