djustments for Deferred Tax Asset Valuation Allowanc

Consider the following income tax footnote information for Oracle for the fiscal year ended May 31, 2019 (fiscal year 2019).

The following is a geographical breakdown of income before the provision for income taxes:

Year Ended May 31 (in millions) 2019 2018 2017

Domestic $4,906 $4,376 $4,776

Foreign 11,042 11,775 10,408

Income before provision for income taxes $15,948 $16,151 $15,184 T

he provision for income taxes consisted of the following:

Year Ended May 31 ($ in millions) 2019 2018 2017

Current provision:

Federal $1,273 $10,816 $1,217

State 390 343 334

Foreign 1,426 1,430 1,918

Total current provision $3,089 $12,589 $3,469

Deferred benefit:

Federal $628 $(1,075) $(205)

State (36) (34) (38)

Foreign (2,140) 8 (329)

Total deferred benefit $(1,548) $(1,101) $(572)

Total provision for income taxes $1,541 $11,488 $2,897

The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before provision for income taxes as follows:

Year Ended May 31 ($ in millions) 2019 2018 2017

U.S federal statutory tax rate 21.0% 29.2% 35.0%

Tax provision at statutory rate $3,349 $4,718 $5,314

Impact of the Tax Act of 2017:

One-time transition tax (688) 10,115 -

Deferred tax effects 182 (1,184) -

Foreign earnings at other than United States rates (1

,026) (1,294) (1,706)

State tax expense, net of federal benefit 256 185 195

Settlements and releases from judicial decisions and statute expirations, net (172) (328) (246)

Domestic production activity deduction - (113) (155)

Federal research and development credit (205) (226) (165)

Stock-based compensation (261) (393) (194)

Other, net 105 8 (148) Total provision for income taxes $1,540 $11,488 $2,895

The components of our deferred tax assets and liabilities were as follows:

May 31 (in millions) 2019 2018 Deferred tax assets:

Accruals and allowances $703 $737

Employee compensation and benefits 840 863

Differences in timing of revenue recognition 419 439

Basis of property, plant and equipment and intangible assets 1,609

Tax credit and net operating loss carryforwards 4,832 3,398

Total deferred tax assets 8,403 5,437

Valuation allowance (1,646) (1,700)

Total deferred tax assets, net 6,757 3,737

Deferred tax liabilities:

Unrealized gain on stock (101) (101)

Acquired intangible assets (1,265) (1,630)

GILTI deferred (1,970)

Basis of property, plant and equipment an intangible assets (205)

Other (260) (62)

Total deferred tax liabilities (3,596) (1,998)

Net deferred tax assets $3,161 $1,739

$ millions 2016 2017

Total deferred tax asset $8,056 $6,417

Valuation allowance 1,513 1,525

Required

a. Use the four-year average valuation allowance to deferred tax assets (20162019) of 22.55% to adjust the income statement for each of the four years 20162019. Follow Analyst Adjustments 10.3 for guidance in the adjustment process.

Note: Use a negative sign to indicate an income statement reversal.

Note: Do not round until your final answer; round your final answers below to the nearest whole dollar.

Income Statement Adjustments 2016 2017 2018 2019 ($ millions)

Income tax expense Answer Answer Answer Answer

Net income Answer Answer Answer Answer

b. Adjust the balance sheet for each of the four years 20162019.

Note: Use a negative sign to indicate a decrease of the balance sheet accounts.

Note: Round your answers to the nearest whole dollar.

Balance Sheet Adjustments 2016 2017 2018 2019 ($ millions)

Valuation allowance Answer Answer Answer Answer

Deferred tax assets, net Answer Answer Answer Answer

Total assets Answer Answer Answer Answer

Retained Earnings Answer Answer Answer Answer