Question
Tax Disclosure INCOME TAXES (In millions) The components of the provision for income taxes were as follows: Current Taxes 2015 2014 2013 U.S. federal $3,661
Tax Disclosure
INCOME TAXES (In millions)
The components of the provision for income taxes were as follows:
Current Taxes | 2015 | 2014 | 2013 |
U.S. federal | $3,661 | $3,738 | $3,131 |
U.S. state and local | 364 | 266 | 332 |
Foreign | 2,065 | 2,073 | 1,745 |
Current taxes | 6,090 | 6,077 | 5,208 |
Deferred Taxes | 2015 | 2014 | 2013 |
Deferred taxes | 224 | (331) | (19) |
Provision for income taxes | $6,314 | $5,746 | $5,189 |
U.S. and foreign components of income before income taxes were as follows: | 2015 | 2014 | 2013 |
U.S. | $7,363 | $7,127 | $6,674 |
Foreign | 11,144 | 20,693 | 20,378 |
Income before income taxes | $18,507 | $27,820 | $27,052 |
The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our effective rate were as follows: | 2015 | 2014 | 2013 |
Federal statutory rate | 35.0% | 35.0% | 35.0% |
Effect of: |
|
|
|
Foreign earnings taxed at lower rates | (20.9)% | (17.1)% | (17.5)% |
Phone Hardware valuation allowance | 19.1% | 0.9% | 0% |
Domestic production activities deduction | (2.4)% | (1.0)% | (1.2)% |
Other reconciling items, net | 3.3% | 2.9% | 2.9% |
Effective rate | 34.1% | 20.7% | 19.2% |
The reduction from the federal statutory rate is primarily due to foreign earnings taxed at lower rates resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico. In fiscal year 2015, this reduction was mostly offset by losses in foreign jurisdictions for which we may not realize a tax benefit, primarily as a result of impairment and restructuring charges. Excluding these losses, our foreign earnings, which are taxed at rates lower than the U.S. rate and are generated from our regional operating centers, were 73%, 81%, and 79% of our foreign income before tax in fiscal years 2015, 2014, and 2013, respectively. In general, other reconciling items consist of interest, U.S. state income taxes, and credits. In fiscal years 2015, 2014, and 2013, there were no individually significant other reconciling items.
The components of the deferred income tax assets and liabilities were as follows: (In millions) | 2015 | 2014 |
Deferred Income Tax Assets | - | - |
Stock-based compensation expense | $884 | $903 |
Other expense items | 1,531 | 1,112 |
Restructuring charges | 211 | 0 |
Unearned revenue | 520 | 520 |
Impaired investments | 257 | 272 |
Loss carryforwards | 1,158 | 922 |
Depreciation and amortization | 798 | 0 |
Other revenue items | 56 | 64 |
Deferred income tax assets | 5,415 | 3,793 |
Less valuation allowance | (2,265) | (903) |
Deferred income tax assets (net) | $3,150 | $ 2,890 |
Deferred Income Tax Liabilities | 2015 | 2014 |
Foreign earnings | $(1,280) | $(1,140) |
Unrealized gain on investments and debt | (2,223) | (1,974) |
Depreciation and amortization | (685) | (470) |
Other | (29) | (87) |
Deferred income tax liabilities | (4,217) | (3,671) |
Net deferred tax assets (liabilities) | $(1,067) | $(781) |
Reported As | 2015 | 2014 |
Current deferred income tax assets | $1,915 | $1,941 |
Other current liabilities | (211) | (125) |
Other long-term assets | 64 | 131 |
Long-term deferred income tax liabilities | (2,835) | (2,728) |
Net deferred income tax assets (liabilities) | $(1,067) | $(781) |
As of June 30, 2015, we had net operating loss carryforwards of $4.6 billion, including $1.8 billion of foreign net operating loss carryforwards acquired through our acquisition of Skype, and $545 million through our acquisition of NDS. The valuation allowance disclosed in the table above relates to the foreign net operating loss carryforwards and other future deductible net deferred tax assets that may not be realized.
Income taxes paid were $4.4 billion, $5.5 billion, and $3.9 billion in fiscal years 2015, 2014, and 2013, respectively.
During 2015, Microsoft Corp. recognized certain stock-based compensation expenses in their income statement that were not permitted as a deduction for tax purposes.
True
False
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