CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following statements concerning valuation allowance for deferred tax assets is FALSE?
A. Valuation allowance is not a discretionary tool.
B. Realization of a valuation allowance in the future has income and cash flow implications.
C. A valuation allowance need not be taken even if the tax rate changes, as they may not be reversible in the future.
Explanation: The timing and amount of a valuation allowance is discretionary and management may use it to manipulate earnings.

User Contributed Comments 2

User Comment
achu Reducing the DTA indeed will lower current period reported net income!
berylzheng Valuation allowance is a discretionary tool to manage earnings.
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