Why should I choose AnalystNotes?

AnalystNotes specializes in helping candidates pass. Period.

Basic Question 1 of 15

Assuming that a firm had taxable income in the previous two-year period, the tax effect of a net operating loss (NOL) usually ______

A. is reflected as a deferred tax asset/liability at the end of the NOL year.
B. results in a current receivable at the end of the NOL year.
C. is subject to a valuation allowance.

User Contributed Comments 7

User Comment
stranger This is treated as an adjustment against previous taxes payable and hence results in a refund or income tax receivable.
kalps Income tax receivable amount if it can be carried back against previous two periods, however if there was no profits in previous two years then it may be a deferred tax asset whereby it cab be set off against future tax liability
freshginger What's wrong with A?
mtcfa I think the answer is correct because it says there were profits in previous years. Otherwise it could be potentially be a deferred tax asset and there fore subject to a valuation allowance. Thus, choices A and B could both be correct. The assumption of previous years taxes is the only thing that holds this question together.
thekid 'A' is wrong b/c it states "deferred tax asset/LIABILITY"....which means it would result in a deferred tax asset (which is correct) OR a deferred tax LIABILITY (which is incorrect).
sshetty2 Sounds similar to how Mr. Trump got away with avoiding to pay millions in tax dollars
Ewan2015 Uh talking of Mr Trump I believe his new Tax Cuts and Jobs Act eliminates the carryback period in almost all instances so the correct answer under new law would be A.
You need to log in first to add your comment.
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt

Martin Rockenfeldt

Learning Outcome Statements

describe the valuation allowance for deferred tax assets - when it is required and what impact it has on financial statements;

explain recognition and measurement of current and deferred tax items;

CFA® 2024 Level I Curriculum, Volume 3, Module 24.