Deferred Tax Asset Flashcards
1
Q
T/F: There needs to be a contra asset account for a deferred tax asset?
A
True
2
Q
How do you determine if there needs to be a balance in the contra asset account for a DTA?
A
Allowance has to be reported if it is more likely than not that it will not be able to realize the future tax asset
If it is more likely than not that they will be able to recognize the future value, then you can use it.
3
Q
What are evidence factors to consider the more likely than not principle?
A
DTA Should be recognized if:
- Strong history of profits
- Strong customer base
- Backlog of orders
- Appreciated assets
DTA should be not recognized if:
- Past expiration of unused NOL carry forwards
- Recent string of operating losses
- Doubt about future profitability
