Asked by Giavanna Battaglia on May 07, 2024
Verified
The GAAP solution for avoiding distortions that would result from setting income tax expense equal to taxes owed is called
A) intraperiod tax allocation.
B) interperiod tax allocation.
C) book income allocation.
D) intraperiod book allocation of income.
Interperiod Tax Allocation
A method used in accounting to distribute income taxes over different periods due to temporary timing differences between when items are recognized for financial reporting and tax purposes.
Intraperiod Tax Allocation
The allocation of tax expense or benefit among different components of comprehensive income, such as operating income and other comprehensive income.
- Understand the principle of interperiod tax allocation and its effect on aligning revenues with expenses.
Verified Answer
AM
Amber MoreheadMay 12, 2024
Final Answer :
B
Explanation :
Interperiod tax allocation is the GAAP solution for avoiding distortions in financial reporting by allocating income tax expense over different periods to match the income tax expense with the revenues that generate those taxes. This approach helps in presenting a more accurate picture of a company's financial performance over time.
Learning Objectives
- Understand the principle of interperiod tax allocation and its effect on aligning revenues with expenses.