A net operating loss carryforward is a supported tax attribute available to reduce taxable income in permitted future periods. Measure its gross deferred tax asset using applicable enacted rates, then evaluate realization under the attribute's jurisdiction, character, expiration, and limitation terms.
Separate the loss from its tax effect
ASC 740-10-25-29 includes operating-loss carryforwards in deferred-tax recognition, subject to stated exceptions. ASC 740-10-50-3 requires disclosure of carryforward amounts and expiration dates.
A supported $100,000 NOL expected to be used when the enacted rate is 21 percent creates a $21,000 gross deferred tax asset. The $100,000 attribute and $21,000 tax effect belong in separate columns. Preserve vintage, expiration, use limits, tax character, jurisdiction, carryback rights, and realization evidence. The model applies supplied terms; it does not establish whether a loss is legally available or forecast enough taxable income to use it.
Before release, tie the remaining attribute to the filed or approved tax schedule and explain each change from the opening vintage balance.
Put the concept to work
Analyze this concept
- Measure the deferred tax asset for a supplied NOL carryforward at the applicable enacted rate and preserve expiration, character, limitations, and realization evidence.
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