Explain the purpose of a deferred tax asset valuation allowance.

Question

Business

Ivan Santos

5 April, 09:47

Explain the purpose of a deferred tax asset valuation allowance.

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Answers (2)

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Onie · Answer 1

Answer and explanation:

Tax-deferred assets are the result if tax deductions with delayed recognition. The purpose of the deferred tax asset valuation allowance is to report an asset that is likely not to be realized during a period. If there is a change in the asset, the variation must be recorded in the income from continuing operations section on the Income Statement.

Shawn · Answer 2

For the reason of carry forwards, every business is expected to have a valuation allowance for deferred tax asset if the business realizes a profit of more than 50%.

Explanation:

A deferred tax asset is a tax reduction whose appearance is delayed because of deductible temporary issues. This can result I'm a similar change in taxes refundable in coming periods. Every business is expected to have a valuation allowance for a deferred tax asset if the business realizes a profit of more than 50%. The purpose of a valuation allowance I'd the situation of carryforwards. If the business has a past experience of letting carry forwards expire unused or incur losses in the next years.

Amounts for allowances are periodically reassessed. The effect of tax of any valuation allowance used to affect the deferred tax asset can influence the annual effective tax rate.