Assuming that Starbucks had no significant permanent differences between book in
ID: 2333445 • Letter: A
Question
Assuming that Starbucks had no significant permanent differences between book income and taxable income, did income before taxes for financial reporting exceed or fall short of taxable income for 2012? Explain.
Exhibit 2.18 Starbucks Income Tax Disclosures (amounts in millions) (Integrative Case 2.1) For the Year Ended September 30 and October 2, respectively: 2012 2011 Income Tax Expense Current: Federal State Foreign 466.0 79.9 76.8 51.7 674.4 344.7 61.2 373 119.9 $563.1 Deferred Total As of the Year Ended September 30 and October 2, respectively 2012 2011 Components of Deferred Tax Assets and Liabilities Deferred tax assets: Property, plant, and equipment Accrued occupancy costs Accrued compensation and related costs Other accrued liabilities Asset retirement obligation asset Deferred revenue Asset impairments Tax credits Stock based compensation Net operating losses Other $ 62.7 72.0 66.9 15.7 20.1 43.7 38.5 14.6 1318 99.2 80.9 646.1 (154.2) 491.9 $ 464 55.9 69.6 27.8 19.0 47.8 60.0 23.0 128.8 85.5 58.6 6224 (137.4) 485.0 Total Deferred Tax Assets Valuation allowance Net Deferred Tax Assets Deferred tax liabilities: Property, plant, and equipment Intangible assets and goodwill $ (89.0) 34.0) s (66.4) (25.2)Explanation / Answer
Starbucks is seen to have high income before tax which exceeds its taxable income since its net deferred tax liability is increased within the period of 2011 and 2012 it is also to be noted that the total income tax expense is higher than income tax payable which will create some deferred tax payment in future. 2012 2011 Total Income tax expense $674.40 $563.10 Current income tax payable= Current income tax + Federal + State 2011 = 344.7 + 61.2 + 37.3 622.7 $443.20 2012 = 466 + 79.9 + 76.8