For December 31, 2020, using your judgment, perform an analysis of the need for a valuation allowance to
offset part, or all, of the deferred tax asset created by the net operating loss carryforward. Document your
judgment in a draft memorandum format that you will provide to the CFO (not to exceed 2-3 pages, double
space, 12 font size). Always include references to the applicable guidance.
Upon completing your documentation, make certain that you are able to address the following considerations:
– Is the documentation sufficient to support your judgment? Specially, regarding the size of the valuation
allowance, why possible alternatives were not selected?
– Can another professional, possibly outside of the accounting field, understand what you are trying to say, as
well as how you reached your conclusion?
Sample Solution
