Abstract The article explores the problem concerning income tax carryforward benefits arising from net operating losses. The theoretical construct underlying income tax allocation is the matching concept. However, conservatism takes precedence over matching where tax benefits stemming from loss carryforwards exist, except in the case of virtual certainty of realization. But carryforward benefits are a valuable asset. They can be realized through profitable operations or sale of the firm. When accompanied by the presence of deferred credits stemming from accelerated tax depreciation, conservatism relative to carryforwards becomes even more arduous.
Wolk et al. (Sun,) studied this question.