If a Company's Deferred Tax Asset Is Not Reduced by a Valuation

question 174

Multiple Choice

If a company's deferred tax asset is not reduced by a valuation allowance, the company believes it is more likely than not that:

• A) Sufficient accounting income will be generated in future years to realize the full tax benefit.
• B) Sufficient accounting and taxable income will exist in future years to realize the full tax benefit.
• C) Sufficient taxable income will be generated in future years to realize the full tax benefit.
• D) Tax rates will not change in future years.

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Definitions:

Accounting Policies

Specific convictions, understructures, modes, prescriptions, and regimens enacted by an entity for the generation and proclamation of financial analyses.

Market Efficiency

The concept that all available information is fully reflected in securities' prices, making it impossible to consistently achieve higher returns without taking on additional risk.

Abnormal Returns

Returns on a security that exceed what is predicted by market models, often attributed to unforeseen events or information.

Publicly Available Information

Information that is accessible to the general public, including but not limited to financial reports, press releases, and government documents.