Advanced English Dialogue for Business – Net operating loss

Listen to a Business English Dialogue About Net operating loss

Addison: Hey Kevin, have you heard about net operating loss?

Kevin: Yes, net operating loss occurs when a company’s allowable tax deductions exceed its taxable income in a given period.

Addison: That’s right. Companies with net operating losses can carry these losses forward or backward to offset taxable income in other years.

Kevin: So, how does carrying forward or backward net operating losses benefit a company?

Addison: Carrying forward or backward net operating losses allows companies to reduce their taxable income in profitable years, potentially lowering their overall tax liability.

Kevin: Are there any limitations or restrictions on carrying forward or backward net operating losses?

Addison: Yes, there are limitations on how much of the net operating losses can be used in a given year, and some jurisdictions may have restrictions on carrying losses backward.

Kevin: How do companies typically account for net operating losses in their financial statements?

Addison: Companies typically record net operating losses as deferred tax assets, representing potential tax benefits that can be realized in future periods.

Kevin: Can net operating losses be used to offset income from other sources, such as capital gains?

Addison: Yes, net operating losses can be used to offset income from other sources, including capital gains, to reduce overall tax liability.

Kevin: Thanks for explaining, Addison. Net operating losses seem like an important aspect of tax planning for businesses.

Addison: You’re welcome, Kevin. Understanding how to utilize net operating losses can help businesses manage their tax obligations and improve their financial performance.