Final answer:
The decommissioning provision is a temporary difference as it leads to a timing difference between the accounting recognition and tax deductibility, which reverses over time when the actual decommissioning costs are incurred.
Step-by-step explanation:
The decommissioning provision is considered a temporary difference. When a company recognizes a decommissioning provision under accounting standards, it results in a liability for the future cost of dismantling or removing a fixed asset and restoring the site on which it is located. However, this liability is generally not deductible for tax purposes until the decommissioning actually occurs or the company is legally required to set aside funds for decommissioning.
Over time, the accounting and tax treatments will converge as the company incurs the decommissioning costs. Therefore, the initial accounting provision creates a timing or temporary difference, which will reverse in the future when the decommissioning costs are deducted for tax purposes or as the provision is used.