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 allowance
• 4:28 - An overview of the applicable accounting guidance
• 7:08 - Tips on when a timely scheduling analysis may be helpful
• 10:38 - Negative evidence represented by cumulative losses in recent years
• 16:05 - The relative weight of projections of future income 
• 24:23 - How tax planning strategies factor into available evidence
• 31:24 - Common misconceptions in performing valuation allowance assessments
• 36:16 - Navigating reversals of valuation allowances: timing, documentation, and disclosures
• 42:04 - Takeaways on improving the process of performing valuation allowance assessments

Want 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]. 

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