Question

When assessing realizability of deferred tax assets, management must consider positive and negative evidence. Which of the following would be considered negative evidence?

A- existing contracts or firm sales backlog

B-a carryback or carryforward period that is so brief it could limit realization of tax benefits

C-taxable income in prior carryback year(s) if carryback is permitted under the tax law

D-a strong earnings history exclusive of the loss that created the future deductible amount

Answer 1

B.- a carry back or carry forward period that is so brief it could limit realization of tax benefits.

Explanation:

An entity must consider all available evidence , both positive and negative when evaluating the realizability of deferred tax assets . Negative evidence include, but it not limited to cumulative losses in recent years , history of operating loss or tax credit carryforwards expiring unused, losses expected in yearly future years , unsettled circumstances if unfavorably resolved , would adversly effect the future operation and future levels on continuing basis in future years or a carryback or carryforward periods that would limit realization of tax benefitsbenefits.