ACCA Strategic Business Reporting (SBR) Practice Exam 2026 – All-in-One Guide to Exam Success!

Taxable temporary differences arise when the carrying amount of an asset or liability in the financial statements differs from its tax base, leading to taxable amounts that will be realized in the future. These differences typically result in the recognition of a deferred tax liability.

A deferred tax liability is created when an entity expects to pay more tax in the future compared to the tax currently payable, due to the timing differences between the recognition of income or expenses in accounting profit and taxable profit. For example, if an asset is depreciated more quickly for tax purposes than for accounting purposes, it results in a lower tax expense in the current period but higher tax expenses in future periods when the tax benefits reverse.

This aligns with the principle of matching, where tax effects of income or expense transactions are recognized in periods that reflect their economic reality, enabling stakeholders to understand the future tax consequences of current transactions. Hence, taxable temporary differences lead to a deferred tax liability as the tax obligation will arise in future periods.