The 2016 Form 10-K of Dow Chemical Company disclosed a valuation allowance of $1,061 million related to various deferred tax assets. The 2015 valuation allowance had a balance of $1,000 million.
What effect did this decrease in the allowance have on Dow Chemical's net income in 2016?

Question

Quizplus · Accepted Answer

The increase in the valuation allowance from $1,000 million to $1,061 million indicates that Dow Chemical recognized an additional expense of $61 million in 2016 to account for deferred tax assets it deemed not likely to be realized. This additional expense would decrease net income by $61 million.

The 2016 Form 10-K of Dow Chemical Company Disclosed a Valuation