Snapchat Inc. reports total tax expense of $2,547 thousand on its income statement for year ended...

   

Transcribed Image Text:

Snapchat Inc. reports total tax expense of $2,547 thousand on its income statement for year ended December 31, 2018, and paid cash of $3,958 thousand for taxes and decreased taxes payable by $755 thousand. The tax footnote in the company's 10-K filing reports the following deferred tax assets and liabilities information. The domestic and foreign components of pre-tax loss were as follows: Year Ended December 31 (in thousands) 2017 2018 Domestic... Foreign... $ (969,922) (283,442) S(3,027,580) (435,828) Loss before income taxes.. $(1,253,364) $(3,463,408) The significant components of net deferred tax balances were as follows: December 31 (in thousands) 2017 2018 Deferred tax assets Accrued expenses 10,534 $ 21,056 Deferred revenue 2,142 976 Intangible assets. Stock-based compensation.. Net operating losses.. Tax credit carryforwards. Property and equipment . 140,771 140,494 396,604 254,255 473,110 849,224 124,078 235,300 203 Other..... 2,015 322 Total deferred tax assets. $1,149,254 $1,501,830 Deferred tax liability Property and equipment.. (5,883) $ Total deferred tax liabilities.. (5,883) Total net deferred tax assets before valuation allowance 1,143,371 1,501,830 Valuation allowance. (1,144,543) (1,502,346) Net deferred taxes 24 (1,172) 2$ (516) Required a. Snapchat's gross deferred tax assets increased during 2018. What two items explain the majority of the increase? b. In 2017, Snapchat reported deferred tax liabilities. Explain how this liability arose. c. Why does the company record a valuation allowance? Given the size of the 2018 allowance, what is the company's expectation of future pretax income? d. Explain how the valuation allowance affected 2018 net income. e. Use the financial statement effects template to record income tax expense for fiscal year 2018 along with the changes in both deferred tax assets and liabilities and the valuation allowance. Snapchat Inc. reports total tax expense of $2,547 thousand on its income statement for year ended December 31, 2018, and paid cash of $3,958 thousand for taxes and decreased taxes payable by $755 thousand. The tax footnote in the company's 10-K filing reports the following deferred tax assets and liabilities information. The domestic and foreign components of pre-tax loss were as follows: Year Ended December 31 (in thousands) 2017 2018 Domestic... Foreign... $ (969,922) (283,442) S(3,027,580) (435,828) Loss before income taxes.. $(1,253,364) $(3,463,408) The significant components of net deferred tax balances were as follows: December 31 (in thousands) 2017 2018 Deferred tax assets Accrued expenses 10,534 $ 21,056 Deferred revenue 2,142 976 Intangible assets. Stock-based compensation.. Net operating losses.. Tax credit carryforwards. Property and equipment . 140,771 140,494 396,604 254,255 473,110 849,224 124,078 235,300 203 Other..... 2,015 322 Total deferred tax assets. $1,149,254 $1,501,830 Deferred tax liability Property and equipment.. (5,883) $ Total deferred tax liabilities.. (5,883) Total net deferred tax assets before valuation allowance 1,143,371 1,501,830 Valuation allowance. (1,144,543) (1,502,346) Net deferred taxes 24 (1,172) 2$ (516) Required a. Snapchat's gross deferred tax assets increased during 2018. What two items explain the majority of the increase? b. In 2017, Snapchat reported deferred tax liabilities. Explain how this liability arose. c. Why does the company record a valuation allowance? Given the size of the 2018 allowance, what is the company's expectation of future pretax income? d. Explain how the valuation allowance affected 2018 net income. e. Use the financial statement effects template to record income tax expense for fiscal year 2018 along with the changes in both deferred tax assets and liabilities and the valuation allowance.

Answer rating: 100% (QA)

SOLUTIONA AS PER THE SCREEN SHOT OF NET DEFERRED TAX BALANCES SHARED THE DEFERRED TAX HAS INCREASED BECAUSE OF THE FOLLOWING TWO ACCOUNTS A NET OPERAT... View the full answer