Accounting for valuation allowances under ASC 740 can be a challenging area because of the extent of judgment involved. PwC’s Heather Horn and Kassie Bauman cover a lot of ground when they take on this complex area. Topics include:
4:35 - Weighing evidence from recent years. We start with how to think about positive and negative evidence and cumulative losses in recent years.
10:00 - Projections of income and what is “objectively verifiable.” Kassie discusses how companies are required to consider all four sources of potential taxable income when evaluating the realization of deferred tax assets and weigh the available positive and negative evidence.
15:09 - Tax planning strategies. Heather and Kassie talk about how to assess available prudent and feasible tax planning strategies, and the importance of real-time documentation of judgments.
18:42 - Common misconceptions. You might need a valuation allowance even when the company is in a net DTL position. And indefinite carryforwards don’t get you off the hook, either. Kassie explains.
22:19 - Valuation allowance reversal. Kassie switches gears to end with a discussion about what listeners should know about when to release a valuation allowance.
Kassie Bauman is a managing director in PwC's National office who consults on tax accounting under US GAAP and IFRS. Kassie has more than 20 years of auditing and accounting experience, including almost a decade of experience addressing complex technical accounting matters as part of our National office.
Heather Horn is PwC’s National office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With over 25 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.
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