Which of the following statements best justifies analyst scrutiny of valuation allowances（）
A. If differences in taxable and pretax incomes are never expected to reverse, a company’ s equity may be understated.
B. Increases in valuation allowances may be a signal that management expects earnings to improve in the future.
C. Changes in valuation allowances can be used to manage reported net income.
参考答案：C
解析：
A valuation allowance is a contra account (offset) against deferred tax assets that reflects the likelihood that the deferred tax assets will never be realized. Changes in the valuation allowance have a direct impact on reported income. Because management has discretion with regard to the amount and timing of a valuation allowance, changes in the valuation allowance give management significant opportunity to manage earnings.