Analyzing and Interpreting Tax Footnote Under Armour, Inc. reports total tax exp
ID: 2532964 • Letter: A
Question
Analyzing and Interpreting Tax Footnote
Under Armour, Inc. reports total tax expense on its income statement for year ended December 31, 2010 of $40,442 and cash paid for taxes of $38,773.
The tax footnote in the company's 10-K filing, reports the following deferred tax information.
Deferred tax assets and liabilities consisted of the following (in thousands):
(a) Did Under Armour's deferred tax assets increase or decrease during the most recent fiscal year?
Under Armour's deferred tax assets Answerdecreasedincreased
by $Answer
(thousands).
(b) Did Under Armour's deferred tax liabilities increase or decrease during the most recent fiscal year?
Under Armour's deferred tax liabilities Answerdecreasedincreased
by $Answer
(thousands).
What proportion of the foreign net operating losses does the company believe will likely expire unused? (Round your answer to the nearest whole number)
Answer
%
e) Use the financial statement effects template to record Under Armour's income tax expense for the current fiscal year along with the changes in both deferred tax assets and liabilities. Assume that income taxes payable increased by $11,431 thousand.
Use negative signs with your answers, when appropriate.
Balance Sheet
Noncash
Assets
Contributed
Capital
Earned
Capital
Income Statement
Net
Income
December 31 ($ thousands) 2010 2009 Deferred tax assets State tax credits, net of federal tax impact $ 1,750 $ -- Tax basis inventory adjustment 3,052 1,874 Inventory obsolescence reserves 2,264 2,800 Allowance for doubtful accounts and other reserves 8,996 7,042 Foreign net operating loss carryforward 10,917 9,476 Stock-based compensation 8,790 5,450 Intangible asset 372 1,068 Deferred rent 2,975 1,728 Deferred compensation 1,449 1,105 Other 2,709 3,151 Total deferred tax assets 43,274 33,694 Less: valuation allowance (1,765) -- Total net deferred tax assets 41,509 33,694 Deferred tax liabilities Prepaid expenses (1,865) (1,133) Property, plant and equipment (3,104) (5,783) Total deferred tax liabilities (4,969) (6,916) Total deferred tax assets, net $ 36,540 $ 26,778Explanation / Answer
A:- increase by $ 7,815
Deferred tax assets increased during the year, which means that the company paidmore taxes than it reported as tax expense.
B:- decrease by $ 1,947
The deferred tax liabilities decreased during the recent year possibly because the company isnow depreciating its fixed assets more for GAAP purposes than it is for tax purposes.
What proportion of the foreign net operating losses does the company believe will likely expire unused? (Round your answer to the nearest whole number)
-->> 16%
e:- Balance Sheet
Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital
Record tax expense, part cash and part deferred=( 38,773) + 7,815 = 9,484 + 0 + ( 40,442)
Income Statement
Revenue - Expenses = Net Income
0 - (40,442) = ( 40,442)