deferred taxation

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A sum set aside for tax in the accounts of an organization that will become payable in a period other than that under review. It arises because of timing differences between tax rules and accounting conventions. The principle of deferred-tax accounting is to reallocate a tax payment to the same period as that in which the relevant amount of income or expenditure is shown. Historically, the most common reason for this timing difference is because the percentages used for the calculation of capital allowances have differed from those used for depreciation.

Subjects: Financial Institutions and Services — Accounting.

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