In AT&Ts 2000 annual report, the company reported long-term deferred tax assets of $4,523,000,000 and current deferred tax assets of $1,791,000,000.
Disclosure Note 15 reported, in part:
At December 31, 2000, we had net operating loss carry-forwards (tax-effected), excluding Excite@Home, for federal and state income tax purposes of $79 and $164, respectively, expiring through 2015. In addition, we had federal tax credit carry-forwards of $145, of which $64 have no expiration date and $81 expire through 2008. We also had state tax credit carry-forwards (tax-effected) of $32 expiring through 2006. In connection with the TCI merger, we acquired certain federal and state net operating loss carry-forwards subject to a valuation allowance of $59.
1. As a potential investor, what significance would you place on the existence of operating loss carry-forwards?
2. What might contribute to AT&Ts need to record a valuation allowance?