Joe, what you are failing to appreciate is that the deferred tax asset has been sitting on the books the whole time with it's own offsetting "liability" which is a valuation allowance, or a reserve against it's potential loss. It's a contra-asset, but a liability nevertheless. So, in this case, they really swapped one liability for another. Go figure....
Do they have any other reserves and allowances that are overstated? That is a question for another post.
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