A set of allowances that an entity creates for the purpose of offsetting the amount of an asset such as a deferred tax asset (DTA). For a DTA, the amount of the allowance is calculated in terms of a portion of a tax asset for which, it is more likely than not (a probability level of more than 50%), a reporting entity will not realize to a tax benefit. Broadly, valuation allowances include ordinary amortization, extraordinary amortization and write-up (impairment changes), direct write-off, direct elimination, periodic reduction, and so on.
Valuations allowances are a form of disclosure techniques.
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