value of geron accrued losses

[biopearl]

I would be obliged if someone with business acumen to could teach me exactly what value the accrued losses of about 900 M has to a future acquisition or how it gets used to offset future profits. Is it a tax write off? Does it offset long term capital gains? Is it dollar for dollar or some fraction depending on corporate tax brackets? Assume in your explanation that I know nothing which in this case would be pretty accurate TIA, bp

[Fishermangents]

Hi Bio, this is from Investopedia:

'Loss Carryforward':
"An accounting technique that applies the current year's net operating losses to future years' profits in order to reduce tax liability. Generally accepted accounting principles (GAAP) specify that loss carryforwards can be used in any one of the seven years following the loss. For example, if a company experienced a negative net operating income (NOI) in year one but positive NOI in one of the next two to seven years, the company could reduce its tax expense for one of those years by applying the loss experienced in the first year."

Link: http://www.investopedia.com/terms/l/los ... orward.asp

This is from InvestingAnswers:

"Tax loss carryforwards create future tax relief for companies and are therefore very valuable. The laws on how tax loss carryforwards apply vary by state, but usually a carryforward from the last two or three years can apply up to the next seven years. After that, the carryforwards expire. There are rules and exceptions for almost any circumstance, so it's best to check with the IRS or a qualified tax accountant when calculating and applying tax loss carryforwards.
As mentioned above, tax loss carryforwards are valuable assets in and of themselves. In fact, sometimes companies purchase other companies solely for their tax loss carryforwards."

Link: http://www.investinganswers.com/financi ... rward-4151

For a company like Geron this Tax Loss Carryforward is huge, even if they expire after zeven years.

[biopearl]

Thanks Fish, it may be that these losses are well over seven year old and should not be fully valued as we think about what Geron's ultimate value will be either as an independent company (unlikely) or as a vassal of J and J. bp

[Fishermangents]

It depends when they are starting/have started to make profit. But even then they can carryforward their losses to reduce taxes on their own revenues, until off course the years of losses have been slipped away beyond the 7 years.

[cheng_ho]

Another reason why a buyout sooner than later makes sense, to use as much of the losses as possible before they expire!

Inflation makes them "expire" anyway, but the seven-year limit is even more urgent.