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Valuation Allowance

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Definition of Valuation Allowance

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Valuation Allowance

A contra- or reduction account to deferred tax assets.
The valuation allowance represents that portion of total deferred tax assets that the firm judges is unlikely to be realized. The probability threshold applied in evaluating realization is 50%. That is, if it is more than 50% likely that some or all of a deferred tax asset will not be realized, then a valuation allowance must be set off against part or all of the deferred tax asset.



Related Terms:

Allowance for bad debts

An offset to the accounts receivable balance, against which
bad debts are charged. The presence of this allowance allows one to avoid severe
changes in the period-to-period bad debt expense by expensing a steady amount to
the allowance account in every period, rather than writing off large bad debts to
expense on an infrequent basis.


Allowance for doubtful accounts

A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.


Allowance for Doubtful Accounts

An estimate of the uncollectible portion of accounts receivable
that is subtracted from the gross amount of accounts receivable to arrive at the estimated collectible
amount.


Allowance method

A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.


Beggar-thy-neighbor devaluation

A devaluation that is designed to cheapen a nation's currency and thereby
increase its exports at other countries' expense and reduce imports. Such devaluations often lead to trade wars.



Capital Consumption Allowance

See depreciation.


Capital Cost Allowance (CCA)

The annual depreciation expense allowed by the Canadian Income Tax Act.


Valuation Allowance Image 2

Depreciation Allowances

Tax deductions that businesses can claim when they spend money on investment goods.


Devaluation

Fall in the government-determined fixed exchange rate.


Devaluation A decrease in the spot price of the currency



Evaluation period

The time interval over which a money manager's performance is evaluated.


Performance evaluation

The evaluation of a manager's performance which involves, first, determining
whether the money manager added value by outperforming the established benchmark (performance
measurement) and, second, determining how the money manager achieved the calculated return (performance
attribution analysis).


performance evaluation

the process of determining the degree
of success in accomplishing a task; it equates to both
effectiveness and efficiency


Revaluation

An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.


Sales allowance

A reduction in a price that is allowed by the seller, due to a problem
with the sold product or service.


Valuation

The process of estimating the value of financial assets or
securities


Valuation Allowance Image 3

Valuation

The act or process of determining the value or price of something. (see fair market value)


Valuation

Estimation of worth.



Valuation Date

Date on which valuation occurs.



 

 

 

 

 

 

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