You have been tasked with understanding income tax reporting at Walmart Corporation and comparing it to Target. Use the following
The Company€™s effective income tax rate is typically lower than the U. S. statutory tax rate primarily because of benefits from lower- taxed global operations, including the use of global funding structures and certain U. S. tax credits as further discussed in the €œ Cash and Cash Equivalents€ section of the Company€™s significant accounting policies in Note 1. The Company€™s non- U. S. income is generally subject to local country tax rates that are below the 35% U. S. statutory tax rate. Certain non- U. S. earnings have been indefinitely reinvested outside the U. S. and are not subject to current U. S. income tax. A reconciliation of the significant differences between the U. S. statutory tax rate and the effective income tax rate on pretax income from continuing operations is as follows:
a. What is Walmart€™s effective tax rate each year? What is the difference between Walmart€™s effective tax rate and the statutory rate? Detail the items making up the difference.
b. Compare Target€™s effective tax rate for 2011, 2012 and 2013 from Example 17.24 in the text to Walmart€™s.
c. Compute Walmart€™s conservatism ratio for each year. Comment on any changes in the ratio over the years. Would you characterize Walmart as a conservative or aggressive tax reporter?
d. Walmart reported income from discontinued operations of $ 144 million and $ 52 million in fiscal 2013 and 2012, respectively. Comment on the implications for computing the conservatism ratio.
e. Compare Target€™s conservatism ratio from Example 17.24 in the text to Walmart€™s.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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