Question

Analyzing and Interpreting Income Tax Disclosures Apple Inc. reports the following footnote disclosure to its 2016 10-K report ($ millions). The provision for income taxes consisted of the following: Fiscal Year Ended September 24, 2016 Federal Current ... Deferred .... $ 7,652 5,043 12,695 State Current ... Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 990 (138) 852 Foreign Current ... Deferred ......... 2,105 33 2,138 $15,685 Total ....... a. What amount of income tax expense does Apple report in its income statement for 2016? b. How much of Apple's income tax expense is current (as opposed to deferred)? c. Why do deferred tax assets and liabilities arise? How do they impact the tax expense that Apple reports in its 2016 income statement?

Answer 1

1	The Income Tax expense reported by Apply Inc is sum of Current and Deferred Tax expense under all the categories, i.e $ 15,685

2	Current and Deferred Tax are as follows
		Current	Deferred
	Federal	7,652	5,043
	State	990	(138)
	Foreign	2,105	33
	Total	10,747	4,938

3. Deferred Tax Assets and Liabilities arise due to temporary differences, i.e.when difference arises between accounting base and tax base.

In case of deductible temporary differences, Deferred Tax assets are created which reduces the tax expense in the books where as in case of Taxable temporary differences, Deferred Tax Liabilities are created which increases the tax expense in the books