what is a valuation allowance
A valuation allowance is a balance sheet line item that offsets all or a portion of the value of a company's deferred tax assets because the company doesn't expect it will be able to realize this value. Sometimes, a company expects it will not be able to realize the benefits of its deferred tax assets. For example, If a company loses $10 million, it would record a deferred tax asset representing the decrease in taxes on its next $10 million in earnings.