Valuation Allowance

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• Valuation Allowance

  • Realization test for deferred tax assets under FASB # 109. Created to address one of the major criticisms of FASB #96’s asymmetrical treatment of assets and liabilities.
    • Very judgmental-area of potential manipulation
    • Both positive and negative evidence must be considered: (Make sure you are clear which of the following represents the need for a valuation allowance, i.e., NEGATIVE evidence, and which demonstrates that a valuation allowance is not needed, i.e., POSITIVE evidence.) Label each of the following items accordingly.

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