Chapter 19, Problem 18Q

To determine

Net operating loss: When the level of income is less than the expenses for a given or a considered period of operation, it is termed as an operational loss. The operational loss can be adjusted either with the future or with the past profits.

Loss carryback: The process of utilizing the previous year’s profit to compensate the current year’s loss is termed as the loss carryback. The immediate previous year should be considered first for compensating the loss. Companies can also claim the loss as their refund of tax paid.

Loss carryforward: The process of utilizing the next year’s or future years’ profit to compensate the current year’s loss is termed as the loss carryforward. The viability of the same is uncertain because companies may incur a loss in the future.

To determine the controversies related to accounting for net operating loss carry forward.