Interpreting the Income Tax Expense Footnote The income tax footnote to the financial statements of FedEx Corporation follows. The components of the provision for income taxes for the years ended May 31 were as follows:

($ millions)	2007	2006	2005
Current provision
Domestic
Federal	$ 829	$ 719	$ 634
State and local	72	79	65
Foreign	174	132	103
	1,075	930	802
Deferred provisions (benefit)
Domestic
Federal	90	151	67
State and local	27	13	(4)
Foreign	7	(1)	(1)
	124	163	62
Provision for income taxes	$ 1,199	$ 1,093	$ 864

(a)What is the amount of income tax expense reported in FedEx's 2007, 2006, and 2005 income statements? 2007 Income Tax Expense = $Answer million 2006 Income Tax Expense = $Answer million 2005 Income Tax Expense = $Answer million (b) What percentage of total tax expense is currently payable in each year?

Round your answers to the nearest percent. 2007Answer% 2006Answer% 2005Answer% Which of the following statements best describes why the percentages of total tax expense are different each year?

Differences in the percentage of income tax expense that is currently payable arise because tax laws change frequently.

Differences in the percentage of income tax expense that is currently payable arise solely because of fluctuations in the amount of taxable income.

Differences in the percentage of income tax expense that is currently payable arise because companies typically defer tax payments in periods of reduced cash flow.

Differences in the percentage of income tax expense that is currently payable arise because of fluctuation in the amount of deferred income tax assets or liabilities.

(c) Which of the following provides the best example that can give rise to an increase in the deferred tax liability?

Deferred tax liabilities arise in periods of higher taxable income.

Companies use an accelerated depreciation method for tax purposes that results in a lower taxable income in the earlier years of the assets life vis--vis net income on the financial accounting books, which reflect straight-line depreciation for GAAP purposes.

Deferred tax liabilities generally arise because companies defer the payment of taxes in periods of low cash flow.

Restructuring accruals provide the best example of an event that gives rise to an increase in deferred tax liabilities.