What is Intraperiod tax allocation?
In short
Intraperiod tax allocation divides a period's total income tax expense among continuing operations, discontinued operations, other comprehensive income and items charged directly to equity, so each is shown net of its own tax effect.
Key takeaways
- Continuing operations get the tax on their own pretax income; the rest is allocated to the other items.
- Discontinued operations are reported net of tax below income from continuing operations.
- Interperiod allocation (deferred taxes) is a different concept, spreading tax across periods.
Where it's tested
FAR: Income Taxes (Deferred Tax Accounting) — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company recognizes a warranty expense of $40,000 for book purposes in the current year, but the deduction is not allowed for tax purposes until the warranty claims are actually paid in future years. What is the tax effect of this temporary difference?