Losses sustained by a company might be available to match against future profits. Lower future profits mean less tax paid. A “tax loss carry forward” refers to the practice of matching the losses of previous periods with a current period’s profits. This modelling guide explains how to calculate and account for tax loss carry forwards that have a limited shelf life i.e. they are forecast to expire.

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TAX LOSS
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4. Losses sustained by a company might be available to match against future
profits. Lower future profits mean less tax paid.
A “tax loss carry forward” refers to the practice of matching the losses of
previous periods with a current period’s profits.
This modelling guide explains how to calculate and account for tax loss carry
forwards that have a limited shelf life i.e. they are forecast to expire.
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PRE-TAX PROFIT AND PRE-TAX LOSS
Calculate a period’s pre-tax profit by applying the formula below. The
MAX function is used to pick up positive numbers only. These are the
profits to be set against available tax losses.
Formula in K10 = MAX(0, K9)
Calculate a period’s pre-tax loss by applying the formula below. The
MIN function is used to pick up negative numbers only. Note the sign
switch in the formula so that the result is a positive number.
Formula in L13 = -1 * MIN(0, L12)
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TAX LOSS DUE TO EXPIRE
Let us assume that a tax authority only allows a tax loss carry forward period of 5 years (note the input in
cell F18).
Tax losses that are not matched against profits in this period will expire after 5 years.
This pre-tax loss of 150 in cell L19
is ready to expire in cell Q21
Formula in Q21 = SUMIF($J20:Q20,Q20 - $F18, $J19:Q19)
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UTILISED TAX LOSSES
“Utilised tax losses” are tax losses that are successfully matched against future
profits.
Utilised tax losses may be calculated as the minimum of (i) pre-tax profits and (ii)
tax losses available for utilisation.
Tax losses available for utilisation are tracked in a corkscrew balance BEG.
Formula in R28 = MIN(R26, R27)
To find out more about modelling balances, please take a look the modelling
guide: “Modelling balances”.
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8. CUMULATIVE TAX LOSS DUE TO EXPIRE
AND CUMULATIVE UTILISED TAX LOSSES
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To calculate expired tax losses, we need to calculate (i) cumulative tax losses ready to expire and (ii)
cumulative utilised tax losses.
Here we have the cumulative tax loss ready to expire from the previous period (cell Q24) plus the current
period tax loss due to expire (cell R23).
Formula in R24 = Q24 + R23
Likewise, we have the cumulative utilised tax losses from the previous period (cell Q31) plus the current
period utilised tax losses (cell R30).
Formula in R31 = Q31 + R30
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TAX LOSS EXPIRED
The tax loss expiring in a period cannot exceed the cumulative tax ready to expire.
We also need to deduct cumulative tax losses utilised and any previous tax losses that have already
expired.
Formula in R35 = MAX(0, R33 - R34 - SUM($I35:Q35))
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TAX LOSS BALANCE
The tax loss balance tracks the tax losses carried forward that are available to be set off against future
taxable profits.
The tax loss balance is calculated as follows:
• plus: pre-tax losses
• less: utilised tax losses
• less: tax loss expired
Formula in R42 = R38 + R39 - R40 - R419
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