What is temporary difference in SAP FI - Financial Accounting?

SAP Term: temporary difference

• Component: FI

• Component Name: Financial Accounting

• Description: The difference between the accounting profit and taxable profit, which arises in the current reporting period, but will change in the subsequent reporting periods. The difference arises when some expenses and incomes are included in the calculation of accounting profit in one reporting period and in the calculation of taxable profit in another reporting period. Temporary differences can be either taxable temporary differences or deductible temporary differences. This term is only relevant for the Russian Federation and Ukraine.

Smart SAP Assistant

• Key Concepts: 
  Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. This difference arises when there is a difference between the accounting treatment and the tax treatment of an item. For example, depreciation expense for tax purposes may be different from depreciation expense for accounting purposes. 
  
  How to use it: 
  In SAP Financial Accounting, temporary differences are used to calculate deferred taxes. Deferred taxes are taxes that are not paid in the current period but will be paid in future periods. The deferred tax calculation is based on the temporary differences between the carrying amount of an asset or liability and its tax base. 
  
  Tips & Tricks: 
  When calculating deferred taxes, it is important to consider both the timing and amount of the temporary differences. The timing of the temporary differences will determine when the deferred taxes will be paid, while the amount of the temporary differences will determine how much deferred taxes will be paid. 
  
  Related Information: 
  For more information on temporary differences and deferred taxes, please refer to SAP Help documentation on Financial Accounting (FI). Additionally, you can find more information on this topic in various accounting textbooks and online resources.