By way of example of the charge that can result from a reduction in corporate income tax rates, the disclosure below is from the earnings release of a large financial institution when the U.K. If a company believes it is more likely than not that some portion or all of the deferred tax asset will not be realized, a valuation allowance must be recognized. NOL and tax credit carryforwards result in reductions to future tax liabilities, and many of these attributes can expire if not utilized within certain periods. According to вЂњThe Trump Plan will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax.вЂќ In light of these dynamics, a potential sleeper issue for many companies, especially those carrying sizeable deferred tax assets on the balance sheet, is a potential charge to earnings resulting from the remeasuring of deferred tax assets due to a change in the corporate income tax rate.ДЄt a high level, deferred tax assets are reported as assets on the balance sheet and represent the decrease in taxes expected to be paid in the future because of net operating loss (NOL) and tax credit carryforwards and because of future reversals of temporary differences in the bases of assets and liabilities as measured by enacted tax laws and their bases as reported in the financial statements. However, many observers now believe a reduction in the corporate tax rate is a realistic possibility as a result of the combination of a new Trump administration and a Republican-controlled Congress. Yogi Berra is often attributed with saying, вЂњItвЂ™s difficult to make predictions, especially about the future.вЂќ This is especially true with predictions about revisions to the tax code. Read more about the impactВ of the lower corporate tax rate, if enacted. Since it has the potential toВ significantly change the corporate tax rate, the below is even more relevant at this time. Update as of December 6, 2017: Congress and the President are nearing the finish line for significant tax reform with the likelihood of passing by the end of the year.

Disclosure of deferred tax asset