10th Edition

ISBN: 9781307662122

Author: SPICELAND

Publisher: MCG/CREATE

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Textbook Question

Chapter 16, Problem 16.8BE

Valuation allowance

• LO16–2, LO16–3

VeriFone Systems is a provider of electronic card payment terminals, peripherals, network products, and software. In its 2015 annual report, the company reported deferred tax assets totaling about $398 million. The company also reported valuation allowances totaling about $332 million. What would motivate VeriFone to have a valuation allowance almost equal to its deferred tax assets?

Definition Definition Items on the balance sheet that are created when the tax paid is more than tax considered on the income statement. Deferred tax assets result from overpayment and advance payment of taxes. They are recorded on the assets side of the balance sheet. A deferred tax asset results in the reduction of a future tax payment and is beneficial to the company. It arises when the profit as per tax laws is more than the profit as per books of accounts.

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Chapter 16 Solutions

INTERMEDIATE ACCOUNTING (ACCT 4950)

Ch. 16 - Prob. 16.1Q Ch. 16 - A deferred tax liability (or asset) is described...Ch. 16 - Prob. 16.3Q Ch. 16 - Prob. 16.4Q Ch. 16 - Temporary differences result in future taxable or...Ch. 16 - Identify three examples of differences with no...Ch. 16 - The income tax rate for Hudson Refinery has been...Ch. 16 - A net operating loss occurs when tax-deductible...Ch. 16 - Prob. 16.10Q Ch. 16 - Additional disclosures are required pertaining to...

Ch. 16 - Additional disclosures are required pertaining to...Ch. 16 - Prob. 16.13Q Ch. 16 - Prob. 16.14Q Ch. 16 - IFRS and U.S. GAAP follow similar approaches to...Ch. 16 - Valuation allowance LO162, LO163 VeriFone Systems...Ch. 16 - Prob. 16.8E Ch. 16 - Identify future taxable amounts and future...Ch. 16 - Prob. 16.14E Ch. 16 - Identifying income tax deferrals LO161, LO162,...Ch. 16 - Concepts; terminology LO161 through LO168 Listed...Ch. 16 - FASB codification research LO165, LO168, LO1610...Ch. 16 - Prob. 16.1DMP Ch. 16 - Prob. 16.2DMP Ch. 16 - Prob. 16.9DMP

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Solution Summary: The author explains that valuation allowance offsets the deferred tax assets either fully or partly as they are more likely not to be realizable.

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Chapter 16 Solutions