Question

Which of the following must be disclosed in a company's disclosure notes regarding net operating loss carryforwards? (Select all that apply.)

a) Expected future loss amounts.

b) The amount of the NOL.

c) The reason for the NOL.

d) The expiration date of the NOL.

Answer 1

Companies must disclose the amount of the NOL, the expiration date, and the reason for the NOL in their financial statement notes. Expected future loss amounts are not a disclosure requirement since they are speculative.

Step-by-step explanation:

When it comes to the disclosure notes for net operating loss (NOL) carryforwards in a company's financial statements, certain information is required for complete transparency. Companies must disclose:

• The amount of the NOL, which is the actual dollar value of the net operating loss that can be carried forward to offset future taxable income.
• The expiration date of the NOL, because net operating losses can only be carried forward and applied against taxable income for a predetermined number of years, as per the tax laws.
• The reason for the NOL, providing a brief explanation of the circumstances or business activities that led to the loss, which can include factors such as market downturns, operational challenges, or special one-time events.

It is not customarily required to disclose expected future loss amounts as these are projections and not certainties.