Loss Carryforward
An accounting technique with which a company applies net operating losses of the current year to future year's profits in order to reduce tax liability.
Investopedia Commentary
If a company were to experience a negative net operating income in year one, but positive net operating income in one of the next two to seven years, the company could reduce its tax expense for one of those years by applying to it the loss experienced in year one. GAAP specifies that loss carryforwards can be used in any one of the following seven years after the loss was experienced.
Related Links
Advanced Financial Statement Analysis
Zooming in on Net Operating Income
Understanding The Income Statement
See also: After Tax Operating Income - ATOI, Exempt Income, GAAP, International Accounting Standards - IAS, Loss Carryback, Net Operating Income - NOI, Tax Liability, Taxable Income