Which of the following is not a correct statement regarding deferred tax asset valuation allowance?

Multiple Choice

• If a deferred tax asset may not be fully realized in future periods, a valuation allowance is required to reduce the asset to the amount that is more likely than not to be realized.
• The determination of whether or not a valuation allowance is necessary is based on subjective assessment.
• Companies without a history of profitability may generate negative income tax expense in the year they first generate a profit if they have a valuation allowance that is reversed in the year of profitability.
• Profitable companies will never have valuation allowances against deferred tax assets.