Analyzing and Interpreting Tax Footnote (Financial Statement Effects Template) Under Armour, Inc. reports total tax expense of $154,112 thousands on its income statement for year ended December 31, 2015, and paid cash of $99,708 thousand for taxes. The tax footnote in the company's 10-K filing, reports the following deferred tax assets and liabilities information. 2015 2014 December 31 ($ thousands) Deferred tax assets Stock-based compensation Allowance for doubtful accounts and other reserves Accrued expenses Foreign net operating loss carryforward Deferred rent Inventory obsolescence reserves Tax basis inventory adjustment U.S. net operating loss carryforward Foreign tax credits State tax credits, net of foreign impact Deferred compensation Other Total deferred tax assets Less: valuation allowance Total net deferred tax assets Deferred tax liability Property, plant and equipment Intangilble asset Prepaid expenses $40,406 $35,161 33,821 24,774 19,999 11,398 19,600 16,302 13,991 11,005 11,956 8,198 10,019 5,845 9,217 4,733 6,151 5,131 4,966 4,245 2,080 1,858 6,346 4,592 178,552 133,242 (24,043) (15,550) 154,509 117,692 (31,069) (17,638) (22,820) (7,010) (8,766) (6,424) (627) (612) (63,282) (31,684) $91,227 586,008 Other Total deferred tax liabilities Total deferred tax assets, net (a) Did Under Armour's deferred tax assets increase or decrease during the most recent fiscal year. By what amount? Under Armour's deferred tax assets increased by $ 0 * (thousands). (b) Did Under Armour's deferred tax liabilities increase or decrease during the most recent fiscal year? Under Amour's deferred tax liabilities increased by $ 0 * (thousands). Which of the following statements best describes the reason for the change in deferred tax liabilities during the most recent year? The deferred tax liabilities decreased during the recent year because they paid down their tax liability. The deferred tax liabilities increased during the recent year possibly because the company is depreciating its fixed assets more for tax purposes than it is for GAAP purposes. The deferred tax liabilities increased during the recent year as a result of the reduction in its effective tax rate. The deferred tax liabilities decreased during the recent year because the company's taxable income was less than in prior year. (C) The company recorded a valuation allowance during the year. This allowance relates to foreign net operating tax losses. Which of the following statements appears to be false regarding the foreign net operating tax losses and the valuation allowance. The company's tax returns have reported losses in foreign jurisdictions. As of the end of 2015, there were insufficient profits and the tax losses could not be used in the current period. As of December 31, 2015, the company believed some of the deferred tax assets associated with foreign tax loss carryforwards would expire unused. Therefore, a valuation allowance was recorded against the company's net deferred tax assets. An increase to a valuation allowance will decrease current year income. An increase to a valuation allowance will increase current year income. What proportion of the foreign net operating losses does the company believe will likely expire unused? Round your answer to the nearest percent. 0 % (d) Explain how the valuation allowance affected 2015 net income. Under Amour's valuation allowance account increased during the year, which means net income increased. Under Amour's valuation allowance account decreased during the year, which means net income increased. Under Amour's valuation allowance account increased during the year, which means net income decreased. Under Amour's valuation allowance account decreased during the year, which means net income decreased. (e) Use the financial statement effects template to record Under Armour's income tax expense for the current fiscal year 2015 along with the changes in both deferred tax assets and liabilities. Assume that income taxes payable increased by $59,623 thousand. Use negative signs with answers, when appropriate. Balance Sheet Income Statement + = Noncash Assets 0 + Transaction Record tax expense, part cash and part deferred + Cash Asset 0x Contributed Capital 0 - Liabilities 0 x Earned Capital 0 x Revenue 0 Expenses 0 x Net Income 0x x Analyzing and Interpreting Tax Footnote (Financial Statement Effects Template) Under Armour, Inc. reports total tax expense of $154,112 thousands on its income statement for year ended December 31, 2015, and paid cash of $99,708 thousand for taxes. The tax footnote in the company's 10-K filing, reports the following deferred tax assets and liabilities information. 2015 2014 December 31 ($ thousands) Deferred tax assets Stock-based compensation Allowance for doubtful accounts and other reserves Accrued expenses Foreign net operating loss carryforward Deferred rent Inventory obsolescence reserves Tax basis inventory adjustment U.S. net operating loss carryforward Foreign tax credits State tax credits, net of foreign impact Deferred compensation Other Total deferred tax assets Less: valuation allowance Total net deferred tax assets Deferred tax liability Property, plant and equipment Intangilble asset Prepaid expenses $40,406 $35,161 33,821 24,774 19,999 11,398 19,600 16,302 13,991 11,005 11,956 8,198 10,019 5,845 9,217 4,733 6,151 5,131 4,966 4,245 2,080 1,858 6,346 4,592 178,552 133,242 (24,043) (15,550) 154,509 117,692 (31,069) (17,638) (22,820) (7,010) (8,766) (6,424) (627) (612) (63,282) (31,684) $91,227 586,008 Other Total deferred tax liabilities Total deferred tax assets, net (a) Did Under Armour's deferred tax assets increase or decrease during the most recent fiscal year. By what amount? Under Armour's deferred tax assets increased by $ 0 * (thousands). (b) Did Under Armour's deferred tax liabilities increase or decrease during the most recent fiscal year? Under Amour's deferred tax liabilities increased by $ 0 * (thousands). Which of the following statements best describes the reason for the change in deferred tax liabilities during the most recent year? The deferred tax liabilities decreased during the recent year because they paid down their tax liability. The deferred tax liabilities increased during the recent year possibly because the company is depreciating its fixed assets more for tax purposes than it is for GAAP purposes. The deferred tax liabilities increased during the recent year as a result of the reduction in its effective tax rate. The deferred tax liabilities decreased during the recent year because the company's taxable income was less than in prior year. (C) The company recorded a valuation allowance during the year. This allowance relates to foreign net operating tax losses. Which of the following statements appears to be false regarding the foreign net operating tax losses and the valuation allowance. The company's tax returns have reported losses in foreign jurisdictions. As of the end of 2015, there were insufficient profits and the tax losses could not be used in the current period. As of December 31, 2015, the company believed some of the deferred tax assets associated with foreign tax loss carryforwards would expire unused. Therefore, a valuation allowance was recorded against the company's net deferred tax assets. An increase to a valuation allowance will decrease current year income. An increase to a valuation allowance will increase current year income. What proportion of the foreign net operating losses does the company believe will likely expire unused? Round your answer to the nearest percent. 0 % (d) Explain how the valuation allowance affected 2015 net income. Under Amour's valuation allowance account increased during the year, which means net income increased. Under Amour's valuation allowance account decreased during the year, which means net income increased. Under Amour's valuation allowance account increased during the year, which means net income decreased. Under Amour's valuation allowance account decreased during the year, which means net income decreased. (e) Use the financial statement effects template to record Under Armour's income tax expense for the current fiscal year 2015 along with the changes in both deferred tax assets and liabilities. Assume that income taxes payable increased by $59,623 thousand. Use negative signs with answers, when appropriate. Balance Sheet Income Statement + = Noncash Assets 0 + Transaction Record tax expense, part cash and part deferred + Cash Asset 0x Contributed Capital 0 - Liabilities 0 x Earned Capital 0 x Revenue 0 Expenses 0 x Net Income 0x x