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Chapter 5 — Valuation Allowances

5.5 Reduction of a Valuation Allowance When Negative Evidence Is No Longer Present

5.5 Reduction of a Valuation Allowance When Negative Evidence Is No Longer Present

When an entity concludes that negative evidence (as discussed in ASC 740-10-30-21) exists and that realization of all or a portion of its DTA as of that date is not more likely than not, the entity would recognize a valuation allowance to reduce its DTA to an amount that is more likely than not to be realized. However, circumstances may change over time such that in a subsequent year, the negative evidence discussed in ASC 740-10-30-21 is no longer present.