Refer to Reebok’s financial statements in Appendix E. Review the balance sheet to determine how and where deferred taxes were reported.

Required

a. Read Notes 1 and 14. Identify and discuss any unusual terms. Also trace disclosures of deferred taxes in the notes to corresponding disclosures in the financial statements.

b. Determine whether Reebok has a deferred tax liability. If it is not a liability, determine what it is and how Reebok’s managers might view its deferred income taxes.

c. Identify the years where Reebok’s income taxes paid (shown at the bottom of the cash flow statement) as a percentage of income before taxes was close to the statutory rate. Also identify any years where Reebok paid less. Did it ever pay more than the overall statutory rate?

d. Discuss any other unusual concerns regarding Reebok’s deferred taxes. What other related information might an external analyst prefer?