Assignment task: For December 31, 2020, using your judgment, perform an analysis of the need for a valuation allowance to offset part, or all, of the deferred tax asset created by the net operating loss carry forward. Document your judgment in a draft memorandum format that you will provide to the CFO (not to exceed 2-3 pages, double space, 12 font size). Always include references to the applicable guidance.
Upon completing your documentation, make certain that you are able to address the following considerations:
Q1. Is the documentation sufficient to support your judgment? Specially, regarding the size of the valuation allowance, why possible alternatives were not selected?
Q2. Can another professional, possibly outside of the accounting field, understand what you are trying to say, as well as how you reached your conclusion?