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:

Valid

An argument whose structure guarantees its conclusion to be true if its premises are true.

Proposition

A verbalization or pronouncement that indicates an appraisal or conviction.

Categorical

Pertaining to, involving, or based on the categorization of something, often used in logic to describe propositions where statements are made about all members of a category.

Validity

The characteristic of being based on valid logic or actual evidence; in the realm of logic, it pertains to the situation where the premises naturally lead to the conclusion.