Timing differences

Timing differences are the intervals between when revenues and expenses are reported for financial statement and income tax reporting purposes. For example, a business might use an accelerated depreciation method to increase its depreciation expense for tax reporting purposes in the current year, while reporting depreciation at a reduced rate on its income statement that spreads the expense more evenly over several years. Over a period of time, these timing differences will even out, though they may be replaced by a new set of timing differences.

When there are timing differences, the amount of reported taxable income could vary significantly from the amount reported on the income statement.

Related Courses

Accounting for Income Taxes