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From Strategic CFO

A net operating loss occurs when a company’s operating expenses and allowable tax deductions exceed its operating income for an accounting period.

From Investopedia

A net operating loss (NOL) occurs when a company’s allowable deductions exceed its taxable income within a tax period.

From my current understanding, these contradict. The way NOL is defined has implications on carryforward. Take the following before considering carryforward:

EBIT:                     1000   3000
Mortgage Interest:       (2000) (2000)
EBT:                     (1000)  1000

Is NOL carry-forward derived from EBIT (both years positive)?

NOL Generated:             --     --
NOL Carry-Forward:         --     -- 

Or is it derived from EBT (first year negative)?

NOL Generated:            1000    --  
NOL Carry-Forward:         --   (800)

800 is used instead of 1000 because NOL deduction was recently limited to 80%. The final difference is that in the second year, we get taxed on $1000 vs. 1000 - 800 = $200.

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You're mixing up different things. The first definition is an accounting definition, and the second definition is a tax definition. These do not have to match (and in fact often don't).

CFOs usually deal with financial reporting and compliance. Financial reporting is done based on GAAP (in the US, IFRS in most other places). GAAP defines what and how should be accounted for and based on that you may end up with NOL on the accounting books and in the financial reports.

For taxes, however, rules may be different. Tax treatment and accounting treatment of certain items may differ, and as the result you may have tax NOL while accounting profit, or the other way around.

For corporations, schedules L, M-1, M-2 and M-3 are used to reconcile tax and accounting books on the IRS tax returns.

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