What are taxable temporary differences?

Taxable temporary differences refer to discrepancies between the carrying amount of an asset or liability in the financial statements and its tax base, which will result in taxable profits in future periods when the asset is recovered or the liability is settled.

When discussing option B, it accurately captures this definition by indicating that these differences will lead to taxable income in subsequent periods. For example, if a company recognizes revenue for accounting purposes before it is taxable under tax law, this creates a taxable temporary difference. As the revenue eventually gets taxed, it will contribute to taxable profits in the future.

In contrast, the other options do not align with the definition of taxable temporary differences. Differences that do not affect taxable profit refer to situations where the timing does not impact the tax position, while permanent differences relate to items that do not reverse over time (e.g., fines or penalties). Adjustments made only at year-end may pertain to accounting practices or closing adjustments but do not specifically define taxable temporary differences. Thus, option B demonstrates the correct understanding of how these discrepancies function within the context of future tax implications.