Lucent Technologies Deferred Taxation

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Executive Summary This memorandum is intended to communicate the deferred tax issues of Lucent Technologies Inc. on the basis of analysis of the veracity of the situation according to the reporting framework’s guidelines to anticipate unfavorable implications that had been resulted due to poor performance of the company over the past years. The Financial Accounting Standards Board (FASB) is the recognized body for making pronouncements as Generally Accepted Accounting Principles (GAAPs) in the United States. The FASB has promulgated Statement of Financial Accounting Standard # 103 “Accounting for Income Taxes” which specifically prescribes the treatment of income taxes of corporate entities and guidance for how deferred taxes should be…show more content…
The statement declares that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence. In contrast, positive includes a strong earnings history (exclusive of any current loss), existing contracts that will produce taxable income in the period of the asset turnaround, or a large excess of appreciated asset value over a tax basis and tax planning strategies. Accordingly, based on the two types of evidences mentioned above, the views of the SEC staff with respect to valuation allowances on deferred tax assets and the types of questions that they might ask if they reviewed the Lucent’s financial reports are as follows; * With respect to valuation allowances the SEC is likely to look at the basics for having or not having a valuation allowance, the timing of recording changes, or consistency with other forward-looking information * Comments relating to the adequacy of disclosures, the actual descriptions of rate reconciliation items, deferred tax assets and liabilities, uncertain tax positions, timing of reversals, or expiration of net operating losses in various jurisdictions. * The SEC may also ask questions relating to contractual obligations * The SEC may also ask for clarification related to

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