Loss Carryback

Loss Carryback

An accounting technique with which a company retroactively applies net operating losses to a preceding year's income in order to reduce tax liabilities present in that previous year.

Notes:

Loss carrybacks are similar to loss carryforwards, except companies apply their net operating losses to preceding rather than subsequent years' incomes. GAAP stipulates that a loss carryback can be applied only to the three years preceding the loss. For instance if a company were to record a net operating loss in year five, the company could apply a loss carryback to any of years two to four.

See also: After Tax Operating Income - ATOI, GAAP, Liability, Loss Carryforward, Net Operating Income - NOI, Taxable Income, Tax Liability