ISBN: 978-1-285-19090-7 Financial Reportin, Financial Statement Analysis, and Valuation

Starbucks Integrative Case 2.1 g. Starbucks uses the straight-line depreciation method for financial reporting and accelerated depreciation for income tax reporting. Like most firms, the largest deferred tax liability is for property, plant and equipment (depreciation). Explain how depreciation leads to a deferred tax liability. Suggest possible reasons why amount of deferred tax liabilty related to depreciation increased between 2011 and 2012.