Tax toolkit: Valuation allowances, weighing the evidence

In our Toolkit podcast series, we are taking a deep dive into one accounting topic each month that goes beyond the basics and into areas that require judgment. This month, we are covering income taxes–an area that generates numerous technical questions.In this episode, Heather Horn was joined by Jenn Spang and Matt McCann, partners in PwC’s National Office, to discuss valuation allowances, an often challenging topic that contains multiple decision points and requires ongoing evaluation.In this episode, you will hear:2:02 - The definition of a valuation allowance4:28 - An overview of the applicable accounting guidance7:08 - Tips on when a timely scheduling analysis may be helpful10:38 - Negative evidence represented by cumulative losses in recent years16:05 - The relative weight of projections of future income 24:23 - How tax planning strategies factor into available evidence31:24 - Common misconceptions in performing valuation allowance assessments36:16 - Navigating reversals of valuation allowances: timing, documentation, and disclosures42:04 - Takeaways on improving the process of performing valuation allowance assessmentsWant to learn more? Listen to the previous podcasts in our Tax toolkit in which we discuss how to consider uncertain tax positions, separate company financial statements, divestitures, and the scope of ASC 740. Also, refer to the chapter on valuation allowances in our Income taxes guide.Jenn Spang is a partner in PwC’s National Office and serves as the income tax accounting leader, specializing in tax accounting under US GAAP and IFRS. She has over 25 years of experience helping companies in a variety of industries navigate complex tax accounting matters.Matt McCann is a partner in PwC's National Office who provides consultation in the areas of revenue recognition and income taxes. He has over 25 years of experience and previously served as the leader of the Consumer & Industrial Products Sector Assurance Practice in North Texas.Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series. With over 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to [email protected]. Did you enjoy this episode? Text us your thoughts and be sure to include the episode name.