Question

Permanent differences impact
a) current deferred taxes.
b) current tax liabilities.
c) deferred tax assets.
d) deferred tax liabilities.

Answer 1

Deferred tax is created for temporary differences which will reverse in subsequent periods.

Permanent differences are those differences which are not possible to reverse off in future periods. So no accounting for deferred tax needs to be done. There is no create deferred tax assets and liabilities on these balances.

Going from the above concept, since there will no impact on deferred, then obviously it will impact current tax liabilities. As per above problem, option (b) is the correct one.

All others options are incorrect because deferred tax does not originate due to permanent differences.