robertc1: The deferred tax asset write off that I have posted about, while caused by tax law changes, is not “new” tax law. What is happening is that because of the reduction in corporate tax rates, a recorded asset account that was based on the difference between the amount of taxes actually paid and the amounts reported in their financial statements has lost value. It is the loss of this potential future value that is being written off (expensed) IAW accounting standards. Below is the best simple explanation of deferred tax assets that I have found:
Understanding Deferred-Tax Assets What deferred-tax assets are and how they're created. placeholder
Lee Samaha (TMFSaintGermain) Jan 15, 2015 at 10:11AM Deferred-tax assets are created when a company's recorded income tax (what it reports in its income statement) is lower than that paid to the tax authority. It's usually a good thing to find on a balance sheet, because the company could receive a future tax benefit from it. In other words, if you're looking at two otherwise identical companies, the one with the deferred-tax asset is more attractive, because it could pay relatively less tax in future. Let's look in more detail and use a simple example to explain the concept. Deferred-tax assets creation?At this point, readers might wonder how a company's recorded income tax could be less than it pays to the authority. In the words of the organization responsible for accounting standards in the U.S., the Financial Accounting Standards Board, or FASB: "Tax laws often differ from the recognition and measurement requirements of financial accounting standards." If the difference between the tax laws (used to measure what the company will pay in tax) and accounting standards (used to define what the company reports in tax) result in a company paying more tax than it records, a deferred-tax asset (representing the difference) is created. You could think of it as a kind of pre-paid tax, which the company might be able to use to reduce its tax bill in future. Examples of how temporary differences between tax laws and accounting standards can occur include net operating losses, warranties, and the timing of recognition of expenses.
Note: This adjustment is different than the additional deferred revenue that will be reported in the fourth quarter as a result of a license explanation. From Dec 4 updated revenue guidance press release;
“Total revenue guidance for the period includes non-recurring revenue attributable to the expected recognition of the remaining portion of the non-refundable prepaid balance on a patent license agreement scheduled to expire at the end of 2017.”
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