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

Required

a. Read Note 6, “Income Taxes.” 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 Wendy’s has a net long-term deferred tax liability. If it is not a liability, determine what it is and how Wendy’s managers might view the income tax carryforward.

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

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