Hi Brian, great video! I'm referring to the same question, in the guide you say that Net Income is down 60 and that the DTA decreases by 100 which equals the full NOL and not its tax impact of 100*40%. Am I referring to an old version of the guide because this appears to be contracting your video? Thanks a lot!
This was an error in an older version of a guide that was corrected in 2013 or 2014 I believe. Again, our policy is that we cannot be responsible for old/pirated/bad versions of the guides. If you have a legitimate account on the site, you can always get the latest version there.
Hi Brian, great work as always. I may miss some info before, and don't know where to download the excel you were demonstrating in the video. Great honor if you can tell me! Thx!
Hi! Thanks a lot for this guide! I'm really confused about NI calculation in 3 forms though. Is it really ok that in case of negative EBT we still account for tax expenses (in this case it will be positive and will be "tax refund"). I mean if we have EBT of (-$100) that's just it, right? Why should we make $(-(-40)) of tax and use this unrealistic 60$ of Net Income? Shouldn't the Net Income be just (-$100)?
Some companies do not do this on their actual financial statements, but this practice makes it much easier to set up and links financial models, which is why we use it. But some companies would just record $0 for their Taxes in real life in this case.
@@scool1018 There is not really a good way to do it otherwise. You'd have to somehow link the DTA to off-statement changes or a separate schedule to set it up, which is not recommended.
Yes, unfortunately UA-cam does not allow us to edit or replace portions of videos, so this one is stuck there until we get around to re-doing and re-uploading this one... and we don't like to do that because then all the links to this video elsewhere break.
Mergers & Inquisitions / Breaking Into Wall Street Hi Brian, in which of your courses is the concept of NOL (and their relationship to DTA) explained/covered?
Mergers & Inquisitions / Breaking Into Wall Street Thank you, Brian. I purchased the fundamentals course several years ago and I am revisiting some content for knowledge refreshment. I can't seem to find the content on NOL. Would you be able to tell me which lesson it is in? Thank you.
Please ask us through the BIWS contact form or by leaving a comment on the site. We cannot post external links to membership-protected content here, so there's no way to point you directly to the lesson in question. You can also search the site for these terms when you log in.
IF THE NOL balance is DIFFERENT than the DTA line item on the BALANCE SHEET then why the heck are they both $175 in year 1? WHat is this?! Some crazy coincidence. This is so damn confusing
The principles remain the same. The 2017 law changed around some of the rules related to carrybacks and expirations. There is actually a video in this channel on the changes from that tax reform if you do a search.
It should not be a part of Working Capital, so you should remove it if it's there and put it elsewhere in Cash Flow from Operations. Some companies classify it there if they feel the DTA is more related to their operations than to their long-term tax situation. But we don't consider it an operational/Working Capital line item in models.
Had a query for you. This is the link to the balance sheet of IESC - a company with about $400m of NOLs. They have shown a benefit for income taxes arising out of their DTA directly in the income statement. Can you look at this and give me your thoughts on this accounting, does it make sense to you? goo.gl/qNKYmU
Sorry, but we can't review financial models or outside documents in this channel. We can provide short, 1-2-sentence answers to questions about the concepts presented in videos,.
It is important to look at both because the DTA balance could include more than just the NOLs, as it is also affected by items like write-downs, impairments, SBC, etc. So they are not the same thing or even related 1:1, though in simplified examples they may be.
![Working Capital and the Change in Working Capital in Valuation and Financial Modeling [REVISED]](/img/n.gif)
Although I am not a fan of taxes, I really enjoyed this tutorial!
+Александр Вальцев Thanks for watching!
Hi Brian, great video! I'm referring to the same question, in the guide you say that Net Income is down 60 and that the DTA decreases by 100 which equals the full NOL and not its tax impact of 100*40%. Am I referring to an old version of the guide because this appears to be contracting your video? Thanks a lot!
This was an error in an older version of a guide that was corrected in 2013 or 2014 I believe. Again, our policy is that we cannot be responsible for old/pirated/bad versions of the guides. If you have a legitimate account on the site, you can always get the latest version there.
Nice educating video. Thank you.Can you cover how you book a state NOL?
State and federal NOLs work the same way and are typically grouped together.
Hi Brian, great work as always. I may miss some info before, and don't know where to download the excel you were demonstrating in the video. Great honor if you can tell me! Thx!
Click on "Show More" under the "Published on Nov 4, 2014" area, and go to the first link there.
Mergers & Inquisitions / Breaking Into Wall Street Ah, sorry. Didn't notice that. Many thanks!
Great video! How do you forecast 'Taxes Payable' (part of Working Capital) on the Balance Sheet?
Make them a percentage of book Income Taxes on the IS
Hi! Thanks a lot for this guide! I'm really confused about NI calculation in 3 forms though. Is it really ok that in case of negative EBT we still account for tax expenses (in this case it will be positive and will be "tax refund"). I mean if we have EBT of (-$100) that's just it, right? Why should we make $(-(-40)) of tax and use this unrealistic 60$ of Net Income? Shouldn't the Net Income be just (-$100)?
Some companies do not do this on their actual financial statements, but this practice makes it much easier to set up and links financial models, which is why we use it. But some companies would just record $0 for their Taxes in real life in this case.
@@financialmodeling yes, I’ve already noticed in practice that this allows for smooth modeling. But how do we model DTA without this “trick”?
@@scool1018 There is not really a good way to do it otherwise. You'd have to somehow link the DTA to off-statement changes or a separate schedule to set it up, which is not recommended.
This one is awesome. Thank you very much!
+Jun Sik Byun Thanks for watching!
A little confusing that the DTA on the balance sheet is $175 and the NOL beginning balance is $175.
Yes, unfortunately UA-cam does not allow us to edit or replace portions of videos, so this one is stuck there until we get around to re-doing and re-uploading this one... and we don't like to do that because then all the links to this video elsewhere break.
Mergers & Inquisitions / Breaking Into Wall Street Hi Brian, in which of your courses is the concept of NOL (and their relationship to DTA) explained/covered?
In the Interview Guide and Fundamentals course
Mergers & Inquisitions / Breaking Into Wall Street Thank you, Brian. I purchased the fundamentals course several years ago and I am revisiting some content for knowledge refreshment. I can't seem to find the content on NOL. Would you be able to tell me which lesson it is in? Thank you.
Please ask us through the BIWS contact form or by leaving a comment on the site. We cannot post external links to membership-protected content here, so there's no way to point you directly to the lesson in question. You can also search the site for these terms when you log in.
Mergers & Inquisitions / Breaking Into Wall Street Brian, thank you. I shall. Thank you for responding.
IF THE NOL balance is DIFFERENT than the DTA line item on the BALANCE SHEET then why the heck are they both $175 in year 1? WHat is this?! Some crazy coincidence. This is so damn confusing
They're not. The DTA at the Beginning of the Period is $70, or $175 * 40% in Year 1.
has any of this information been outdated following the 2017 tax reform?
The principles remain the same. The 2017 law changed around some of the rules related to carrybacks and expirations. There is actually a video in this channel on the changes from that tax reform if you do a search.
Could you please record video about carry backs? Thank you!
Thanks for your suggestion. I will see if we can do this in the future.
Why DTA is in Working capital on the cash flow statement, but appears as Long term asset on the Balance sheet here?
It should not be a part of Working Capital, so you should remove it if it's there and put it elsewhere in Cash Flow from Operations. Some companies classify it there if they feel the DTA is more related to their operations than to their long-term tax situation. But we don't consider it an operational/Working Capital line item in models.
Hi Brian! the spreadsheet on 3 statement is not opening!
Sorry, this one is no longer available. These accounting lessons/links are old and will eventually be updated/replaced.
Bravo!! Great work; your brain is on rapid fire or the material is too familiar to you lol. Wouldn't hurt to slow it down.
The pacing is better in the more recent videos in this channel
Great Tutorial - cheers.
Thanks for watching!
Had a query for you. This is the link to the balance sheet of IESC - a company with about $400m of NOLs. They have shown a benefit for income taxes arising out of their DTA directly in the income statement. Can you look at this and give me your thoughts on this accounting, does it make sense to you?
goo.gl/qNKYmU
Sorry, but we can't review financial models or outside documents in this channel. We can provide short, 1-2-sentence answers to questions about the concepts presented in videos,.
Thank youuu!!!
+909Mino Thanks for watching!
The way you proceed is not clear at all. You should only focus on DTA balance, not NOL. It only add complexity...
It is important to look at both because the DTA balance could include more than just the NOLs, as it is also affected by items like write-downs, impairments, SBC, etc. So they are not the same thing or even related 1:1, though in simplified examples they may be.
@@financialmodeling thanks for your answer. I agree with you, but we could simply suppose in the video that DTA is linked to NOL only
@@financialmodeling but I really love your work, and I am infinitely gratefull for your videos which really help me