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if a company recognizes a net operating loss this year on its tax return, the results...

if a company recognizes a net operating loss this year on its tax return, the results of this on the financial statement will be:

Deferred tax liability will decrease

Deferred tax assets will decrease

Deferred tax assets will increase

Deferred tax liability will increase

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Answer:-

If a company recognizes a net operating loss this year on its tax return, the results of this on the financial statement will be:

Deferred Tax assets will increase.

Net Operating Losses are allowed to be carried forward in future years to be adjusted with earnings in future years. Hence , Deferred Tax Asset is created in the year of loss itself which is to adusted in upcoming year to be adjusted with Company's Future Liability. Such losses gives rise to benefits in the form of Tax Incentive which could be adjusted against Future Liabilties

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