Question

What is meant by “tax allocation within a period”? What is the justification for such practice?

Short answer

The tax allocation within a period refers to the technique of allocating income taxes. The justification for this approach is producing financial statements that disclose the appropriate relationship.

Step-by-step solution

Meaning of tax allocation within a period

Tax Allocation within a period refers to tax allocation to the various income statement elements like extraordinary items, prior period adjustments, etc.

Explanation for justification for such practices

Intra period tax allocation is also helpful for better understanding the impact of income taxes on the different elements of net income. The justification for tax allocation in a period is producing the financial statements that disclose relationships between income tax expense and extraordinary items, prior period adjustments, and income before extraordinary items.