This study analyzed how the future corporate tax effects of tax loss carryforwards affect financial analysts' earnings forecast errors. The current Korean Accounting Standards No. 16 on deferred income taxes permits managerial discretion in recognizing the future tax effects of tax loss carryforwards (Baek and Kim 2005; Jeon and Choi 2004, etc.). While prior studies in the deferred tax area have primarily focused on value relevance, this study differs from previous research in that it analyzes the bias and accuracy of financial analysts' earnings forecasts. The empirical analysis covers the period from 1999 to 2004. According to the empirical results, first, when examining the recognition of tax loss carryforwards, firms that recorded tax effects of tax loss carryforwards exhibited lower accuracy in financial analysts' earnings forecasts. Second, using the current-period change in the future tax effects of tax loss carryforwards, it was found that as the amount of tax loss carryforward effects recognized as assets increased compared to the prior period, financial analysts' earnings forecasts exhibited greater optimistic bias relative to actual earnings. Finally, additional analysis with stock prices revealed that larger deferred tax effects of tax loss carryforwards were associated with significantly negative coefficients for stock prices. These results indicate that the stock market's response to the tax effects of tax loss carryforwards is negative. Synthesizing the above findings, the predictive information about corporate prospects provided by managers through their assessment of tax loss carryforward asset recognition is not useful in improving the accuracy of financial analysts' earnings forecasts and is not effective in reducing information asymmetry between managers and information users. The significance of this study lies in examining whether the predictive information on managerial business outlook provided through the assessment of tax loss carryforward asset recognition is utilized in financial analysts' earnings forecasting process.