Question:

a. What might be the reason why IAS 12 extensively discusses temporary (taxable or deductible) differences but does not mention permanent differences?

b. Does the following situation give rise to a temporary difference or not? If yes, indicate whether it is deductible or taxable.

1. Interest receivable is accrued for reporting purposes but taxed on a cash basis. 2. A provision for decommissioning costs of an asset is recognized for reporting purposes but not for tax purposes. 3. An investment fund is tax-exempt, but on any dividends, it pays a withholding tax (the shareholders are liable to pay income tax on the dividends). 4. Financial assets are carried at fair value, which exceeds cost, but no equivalent adjustment is made for tax purposes. 5. Depreciation of an asset is accelerated for tax purposes.