If a company's deferred tax asset is not reduced by a valuation allowance, the company believes it is:

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A deferred tax asset represents the amounts of income taxes recoverable in future periods due to deductible temporary differences and carryforwards. If a company does not reduce its deferred tax asset by a valuation allowance, it indicates that the company believes it is "more likely than not" (i.e., a likelihood of more than 50%) that it will generate sufficient taxable income in the future to utilize the tax benefit associated with the deferred tax asset.

If a Company's Deferred Tax Asset Is Not Reduced by a Valuation