Valuation Allowance
/ˌvæljuˈeɪʃən əˈlaʊəns/
Definitions
- (n.) An accounting reserve that reduces deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
The company recorded a valuation allowance against its deferred tax assets due to uncertain future profitability.
Forms
- valuation allowance
- valuation allowances
Related terms
See also
Commentary
The valuation allowance reflects management's judgment about the realizability of deferred tax assets and should be carefully supported by evidence to comply with accounting standards.
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