Specifically, it discusses deferred taxes that cause deferred tax assets and deferred tax liabilities as well as the potential need to record a valuation allowance for them. A valuation allowance for these is created based on the potential that the asset or liability will not be realized in the future.
Often times when a company incurs certain types of losses, they will be allowed to carry these forward and take them against future income. One strong possibility of this happening is the company not having enough income to set off tax credits they record as deferred tax assets in which they are carrying forward from prior years.
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