Deferred Tax Liability

CFA Level I FRA
#1

Dear Friends,

Here is an extract from 2008 Level 1 CFA Curriculum. In the section on “Treatment of Operating Losses”:

  1. How does the author say “Operating losses are due to an excess of tax deductions over taxable revenues”?

  2. What does the author mean by this sentence, “Tax losses may be also carried forward to future periods if insufficient taxes were paid during the carryback period or the firm would lose valuable tax credits if losses were carried back to that period.”

Moreover, if you could summarize the entire section then I would be highly grateful.

Regards,

Raj