Reformulation for Deferred Tax Asset Valuation Allowance

Under Armour Inc. reports total tax expense of $154,112 thousand on its income statement for year ended December 31, 2015, and paid cash of $99,708 thousand for taxes. The tax footnote in the companys 10-K filing, reports the following deferred tax assets and liabilities information.

December 31 ($ thouands)	2015	2014
Deferred tax assets
Stock-based compensation	$ 40,961	$ 35,716
Allowance for doubtful accounts and other reserves	34,376	25,329
Accrued expenses	19,999	11,398
Foreign net operating loss carryforward	19,600	16,302
Deferred rent	13,991	11,005
Inventory obsolescence reserves	11,956	8,198
Tax basis inventory adjustment	10,019	5,845
U.S. net operating loss carryforward	9,217	4,733
Foreign tax credits	6,151	5,131
State tax credits, net of foreign impact	4,966	4,245
Deferred compensation	2,080	1,858
Other	6,346	4,592
Total deferred tax assets	179,662	134,352
Less: valuation allowance	(24,010)	(15,517)
Total net deferred tax assets	155,652	118,835
Deferred tax liability
Property, plant and equipment	(31,069)	(17,638)
Intangible asset	(22,820)	(7,010)
Prepaid expenses	(8,766)	(6,424)
Other	(627)	(612)
Total deferred tax liabilities	(63,282)	(31,684)
Total deferred tax assets, net	$ 92,370	$ 87,151

Use the above information along with the information below to answer the requirements.

$ thousands	2012	2013
Deferred tax asset	$ 65,008	$ 106,932
Valuation allowance	3,999	7,985

a. Use the four-year average valuation allowance to deferred tax assets (2012 through 2015) to reformulate the income statement for each of the four years 20122015. See Analyst Adjustments 10.3 for guidance in the reformulation process.

Compute four year average of valuation allowance/deferred tax assets

Round to one decimal place (ex: 0.2345 = 23.5%)

Answer

%

• Use rounded percentage for subsequent computations.

• Round answers to the nearest whole number.

• Use negative signs with answers to indicate adjustments that reduce account balances.

Income Statement Adjustments	2012	2013	2014	2015
Income tax expense
Net income

b. Reformulate the balance sheet for each of the four years 20122015.

• Use rounded answers computed in part a. to complete the table below.

• Use negative signs with answers to indicate adjustments that reduce account balances.

Balance Sheet Adjustments	2012	2013	2014	2015
Valuation allowance
Deferred tax assets
Total assets
Retained earnings