According to GAAP for accounting for income taxes, when a company has a net operating loss carryforward:

Question

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When a company has a net operating loss carryforward, it creates a deferred tax asset on its financial statements as a future tax benefit. This is because the company is able to reduce its taxable income and thus lower its future taxes owed. However, a valuation allowance may also need to be applied to the deferred tax asset depending on the likelihood that the company will be able to use it in the future. Therefore, the correct answer is D, where a deferred tax asset is recorded along with any applicable valuation allowance.

According to GAAP for Accounting for Income Taxes, When a Company