Deferred Tax Items
Prior to beginning work on this assignment, review Chapter 13 of the textbook. Choose one publicly traded company from the S&P 500. This may not be the same company you used for your Effective Income Tax Rates discussion. Review the financial statements for this company for its last three fiscal years.
In your Deferred Tax Items paper,
- List the deferred tax assets that have been recorded on the company’s financial statements in each of the last three fiscal years.
- Explain how these items created the deferred tax assets.
- Explain how the company might recover the benefit of these deferred tax assets in the future.
- Describe the potential timing of this recovery.
- Identify the company’s valuation allowance on its deferred tax assets, including any changes to this allowance in the past three fiscal years.
- Explain what this valuation allowance and any changes to it indicates about the company’s future earnings prospects.
- Identify the deferred tax liabilities that have been recorded on the company’s financial statements in each of the last three fiscal years.
- Interpret how these items created the deferred tax liabilities.
- Explain under what circumstances this deferred tax liability may become payable and the potential timing of this payment.
- Identify any changes in accounting assumptions that impacted the deferred tax assets or deferred tax liabilities (e.g., changes to depreciation methods, changes in inventory methods, etc.).
- Calculate the company’s debt-to-equity ratio under the following conditions:
- Classify deferred tax liabilities as debt.
- Classify deferred tax liabilities as equity.
- Exclude deferred tax liabilities from both debt and equity.
- Classify the deferred tax liabilities as debt or equity (or neither) for purposes of analyzing the company.
- Provide justification for your decision.
- Compare the company’s provision for income taxes to the company’s cash tax payments in each of the three fiscal years.
- State at least three factors that might contribute to increased or decreased cash tax payments in the next fiscal year for this company.
The Deferred Tax Items paper
- Must be three to four double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the APA Style (Links to an external site.) resource. Within these three to four pages, provide data tables and calculations. These tables and calculations should be approximately 10% to 20% of the total work product.
- Must include a separate title page with the following:
- Title of paper
- Student’s name
- Course name and number
