Ally Bank 2012 Annual Report Download - page 92

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A valuation allowance of $1.6 billion and $2.1 billion was recorded against the net U.S. deferred tax asset balance as of December 31,
2012, and December 31, 2011, respectively. For the year ended December 31, 2012, our results from operations benefited $1.3 billion from
the release of U.S. federal and state valuation allowances and related effects on the basis of management's reassessment of the amount of its
deferred tax assets that are more likely than not to be realized.
As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future
realization of deferred tax assets. As of December 31, 2012, we determined that positive evidence existed to conclude that it is more likely
than not that ordinary-in-character deferred tax assets are realizable, and therefore, we reduced the valuation allowance accordingly. Positive
evidence in this assessment consisted of forecasts of future taxable income that are sufficient to realize net operating loss carryforwards
before their expiration, coupled with our emergence from a cumulative three-year U.S. pretax loss (after removing the effects of non-recurring
charges and discontinued operations). Certain U.S. deferred tax assets remain offset with a valuation allowance as discussed below.
We believe it is more likely than not that the benefit for certain U.S. net operating loss, capital loss, and foreign tax credit carryforwards
will not be realized. In recognition of this risk, we have provided a valuation allowance of $1.6 billion on the deferred tax assets relating to
these carryforwards. In particular, the deferred tax assets and liabilities as of December 31, 2012, reflect the U.S. income tax effects of the
anticipated sale of entities held-for-sale at net book value. In concluding to maintain a valuation allowance against our capital loss
carryforwards, we considered the positive evidence that we have entered into agreements to sell our held-for-sale entities for amounts in
excess of book value. We also considered and ultimately weighted more heavily the negative evidence that we have historically had difficulty
generating significant capital gains; capital loss carryforwards have a relatively short carryforward period; the timing of disposal of the held-
for-sale entities is uncertain; and the disposal of the held-for-sale entities are subject to various levels of regulatory approval in numerous
countries. Successful completion during 2013 of the sales of entities currently held-for-sale may result in capital gains that would allow us to
realize capital loss carryforwards. A related reversal of valuation allowance on these deferred tax assets would be recognized as an income tax
benefit upon such utilization.
For additional information regarding our provision for income taxes, refer to Note 23 to the Consolidated Financial Statements.
Recently Issued Accounting Standards
Refer to Note 1 to the Consolidated Financial Statements for further information related to recently adopted and recently issued
accounting standards.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K