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An enacted tax law or tax rate change entails reconsideration of the realizability of existing deferred tax assets. Consistent with ASC 740-10-45-15, all effects of a tax law change, including any creation of or adjustment to a valuation allowance, should be included in income from continuing operations for the period that includes the enactment date.
In some instances, tax rate changes may be enacted after year-end but before the financial statements are issued. In those situations, in accordance with ASC 740-10-45-15, any change in the valuation allowance would not be recognized until the period that includes the enactment date. Some might argue that the valuation allowance assessment should take into consideration all available evidence regarding the realizability of deferred tax assets. However, the guidance is clear that the entire effect of a change in tax rate or tax law should be reflected in the period of enactment, regardless of whether the financial statements for a prior period have been issued. Accordingly, a change in valuation allowance as a result of a change in tax law, which is enacted after year-end but before the financial statements are issued, would not be recorded at year-end. The prior period financial statements should, however, disclose the expected impact.

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