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Flashcards in Net Operating Losses Deck (10):

What two options does a firm have when it has an NOL?

1.) Carryback,carryforward option - NOL is first carried back two years, the remainder is carried forward 20
2.) Carryforward only option - cannot be carried back only forward 20 years.


What is the accounting entry for a carryback of NOL?

Results in an immediate refund of tax
DR: Refund Receivable
CR: Income Tax Benefit


Describe the general effect of net operating loss (NOL) on ending deferred tax asset balance for carryforward only option.

Include in ending DTA the full NOL multiplied by the future enacted tax rate


What is the journal entry for recording a net operating loss carryforward?

DR: Deferred Tax Asset
CR: Income Tax Benefit


What effect does a change in tax status from taxable to nontaxable have on deferred tax accounts?

Close the accounts against income tax expense (for example, closing a deferred tax asset increases income tax expense).


True or False: The total of all deferred tax assets and deferred tax liabilities are not required to be disclosed.

False. Total of all deferred tax assets and deferred tax liabilities are required to be disclosed.


What effect does income tax benefit have on income for financial reporting?

Increase net income


What is the main reason for choosing the carryforward only option?

An expectation of higher future tax rates


What tax rate is used in computing a refund from carryback of net operating losses?

Tax rate paid on taxable income for the previous two years.


What should deferred tax accounts under international accounting standards be classified as?

The classification is all noncurrent

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