In this study, I provide evidence that the valuation allowance for deferred tax assets helps predict the future creditworthiness of a firm. Under the provisions of SFAS No. 109, a firm records a deferred tax asset provided it expects to generate sufficient taxable income to realize the asset in...

This study examines the impact of FASB Interpretation No. 48 (FIN48), Accounting for Uncertainty in Income Taxes , on earnings management (EM) activity, by focusing on changes in the deferred tax asset valuation allowance (DTVA). FIN48 was adopted, in part, over concerns that firms were using...