Under Armour, Inc., reports total tax expense of \$74,661 (in thousands) on its income statement for year ended December 31, 2012, and paid cash of \(\$ 57,739\) (in thousands) for taxes. The tax footnote in the company's 10-K filing, reports the following deferred tax assets and liabilities information.

Required

a. Under Armour's deferred tax assets increased during the most recent fiscal year. What explains the increase?

b. Did Under Armour's deferred tax liabilities increase or decrease during the most recent fiscal year? Explain how the change arose.

c. The company's valuation allowance relates to foreign net operating tax losses. Explain how tax losses give rise to deferred tax assets. Why does the company record a valuation account? What proportion of these losses, at December 31, 2012, does the company believe will likely expire unused?

d. Explain how the valuation allowance affected 2012 net income.
\(e\). Use the financial statement effects template to record Under Armour's income tax expense for the fiscal year 2012 along with the changes in both deferred tax assets and liabilities. Assume that the amount needed to balance the tax transaction represents the amount payable to tax authorities.

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December 31 (In thousands) Deferred tax assets Allowance for doubtful accounts and other reserves... Stock-based compensation...... Foreign net operating loss carryforward Deferred rent..... Inventory obsolescence reserves.. Tax basis inventory adjustment.. State tax credits, net of federal tax impact Foreign tax credits ..... Deferred compensation. Other..... Total deferred tax assets. Less: valuation allowance. Total net deferred tax assets. Deferred tax liability Intangible asset Prepaid expenses. Property, plant and equipment. Total deferred tax liabilities.. Total deferred tax assets, net. 2012 $14,000 13,157 12,416 6,007 4,138 3,581 2,856 2,210 1,170 4,918 64,453 (3,966) 60,487 2011 $9,576 11,238 11,078 4,611 3,789 4,317 - 1,784 1,448 3,427 51,268 (1,784) 49,484 (341) (2,968) (13,748) (610) (4,153) (10,116) (14,879) (17,057) $45,608 $32,427