Objective: To analyze the financial statements of a publicly traded company Obta
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Question
Objective: To analyze the financial statements of a publicly traded company Obtain an annual report from a publicly traded corporation that is interesting to you. Be sure the company’s financial statements include deferred taxes, post-retirement benefits, dilutive securities, and share-based compensation. Using techniques you have learned in the previous weeks, respond to the following questions. What amount of deferred tax assets or deferred tax liabilities are on the two most recent years on the balance sheet? What gives rise to these deferred taxes? What information is disclosed in the footnotes related to deferred taxes? Please define a deferred tax asset and deferred tax liability. What temporary and permanent differences does the company disclose in their footnotes? What are some other examples of temporary and permanent differences? What is the amount of income tax provision in the two most recent years on the income statement? What information is disclosed in the footnotes relating to income tax expense? Does the company have a net operating loss carry-forward or carry-back? What are the guidelines for carry-forwards and carry-backs? Does the company have a defined benefit or defined contribution plan? What are the key elements of the plan discussed in the footnotes? What amounts on the balance sheet relate to this plan? What are the differences between defined benefit and defined contribution plans? What are the earnings per share amounts disclosed on the income statement for the most recent year? What dilutive securities are discussed in the footnotes? Please identify and describe other examples of dilutive securities. How do these impact earnings per share? What kind of share-based compensation does the company have? What was compensation expense for the two most recent years? What are the key elements of this plan discussed in the footnotes? Please identify and describe other types of share-based compensation. Does the company use the direct or indirect cash flow presentation method? What is the difference between these two methods? How does the cash flow statement agree to the other financial statements? What investing and financing activities does the company have? What are some other examples of investing and financing activities? What noncash transactions does the company have on its cash flow statement? What are some other examples of noncash transactions? Guidelines Back to Top Papers must be 7–10 pages in length, double-spaced, and with 12-point font. Include a cover page, table of contents, introduction, report body, summary or conclusion, and works cited. Even though this is not a scientific-type writing assignment, references are still very important. At least three authoritative, outside references are required (anonymous authors or web pages are not acceptable). These should be listed on the last page titled Works Cited. Appropriate citations are required.
Explanation / Answer
Publicly traded company for this study is selected as: Samsung
Annual Report 2014 can be found at this url [http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downloads/2015/SECAR2014_Eng_Final.pdf]
1. What amount of deferred tax assets or deferred tax liabilities are on the two most recent years on the balance sheet? - Refer to page 90 of the annual report. (Figures are in millions of Korean Won)
The Deferred tax assets as on December 31 2014 = 4,526,595
The Deferred tax liabilities as on December 31 2014 = (4,097,811)
The Deferred tax assets as on December 31 2013 = 4,621,780
The Deferred tax liabilities as on December 31 2013 = (6,012,371)
2. What gives rise to these deferred taxes? What information is disclosed in the footnotes related to deferred taxes?
In the Notes provided in the annual report the following is given related to deferred taxes
"Deferred tax is recognized for temporary differences arising between the tax bases of assets and liabilities and their carrying amounts as expected tax consequences at the recovery or settlement of the carrying amounts of the assets and liabilities. However, deferred tax assets and liabilities are not recognized if they arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
3. Please define a deferred tax asset and deferred tax liability.
A deferred tax liability is recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary difference will not
reverse in the foreseeable future. In addition, a deferred tax asset is recognized for deductible temporary differences arising from such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be
utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities
where there is an intention to settle the balances on a net basis."
4. Does the company have a defined benefit or defined contribution plan?
Samsung has defined benefit plan. Refer page 82 for details of such contributions.
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