Hey everybody. I would like to clear up on deffered tax asset q if someone can please clear this up for me. In CFAI book it says: “When deferred tax assets are no longer realizable, if no valuation allowance had been provided, then the establishment of such an allowance reduces reported income and equity”. I don’t really understan this if someone can please help. Tnx in advance. Miha
you recognize allowance when you realized that some of DTA will not be realized. In this situation, DTA are not realizable, so no need for valuation allowance. However, if you established a valuation allowance to already non realizable DTA, the allowance will reduce income and equity.