interperiod tax allocation definition

Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that equipment be depreciated on the income tax return over a 7-year period. However, accounting principles require that for financial statements the equipment be depreciated over its useful life. The useful life might be more than 7 years or it might be less than 7 years. These "timing" differences lead to interperiod tax allocation.