Assignment is in "ASC 740 Project" attached
ASC 740_SFAS 109 Project Part I: Prepare Tax Disclosures 1. Use the information from and your solution to Project 1. Use the spreadsheet you created for Project 1 to prepare the relevant tax footnote disclosures required by ASC 740 and SEC Regulation S-X §210.4-08(h), without regard to materiality [HINT – For guidance, use the sample disclosures in Appendix E of the Roadmap to Accounting for Income Taxes].[footnoteRef:1] The disclosures should look like those found in an annual report – neatly formatted with proper headings and labels. To the extent possible, you should link the numbers in the disclosures to the information from your spreadsheet. [1: Express the ETR reconciliation in both percentages and dollars of income tax expense.] Part II: Review SEC Form 10-K Tax Disclosures Texas Instruments Incorporated (NASDAQ: TXN) designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. It operates in two segments, Analog and Embedded Processing. The Analog segment offers power products to manage power requirements in various levels using battery management solutions, portable components, power supply controls, point-of-load products, switches and interfaces, integrated protection devices, high-voltage products, and mobile lighting and display products. This segment also provides signal chain products that sense, condition, and measure signals to allow information to be transferred or converted for further processing and control for use in end markets, including amplifiers, data converters, interface products, motor drives, clocks, and sensing products and high volume products comprising integrated analog and standard products, which are primarily for sale into personal electronics, industrial, and automotive markets. The Embedded Processing segment offers connected microcontrollers, such as microcontrollers, microcontrollers with integrated wireless capabilities, and stand-alone wireless connectivity solutions that are used in electronic equipment; digital signal processors for mathematical computations; and applications processors for specific computing activity. This segment offers products for use in various markets, such as industrial, automotive, personal electronics, communications equipment, enterprise systems, and calculators and other. The company also provides DLP products primarily for use in projectors to create high-definition images; calculators; and application-specific integrated circuits. Texas Instruments Incorporated markets and sells its semiconductor products through direct sales and distributors, as well as through its website. The company was founded in 1930 and is headquartered in Dallas, Texas. Download the 10-K for Texas Instruments for the year ended December 31, 2019. I have also included a spreadsheet that includes data from most of the tables in the text filing. You should use this spreadsheet to help you answer Q4, below. Answer the following questions related to Accounting Standards Codification 740 (ASC 740): The Accounting for Income Taxes. 1. In the MD&A, TXN describes an “annual operating tax rate” and an “effective tax rate”. Conceptually, what is the difference between the two tax rates? 2. Which rate do you think TXN managers use for forecasting? Explain. 3. What is the GAAP “estimated annual effective tax rate”? 4. Find the following items in TXN’s 2019 10-K MD&A, financial statements, and footnotes for all applicable years. When possible, compute year-to-year changes (in dollars and percentages). (NOTE: you will find some of the items in the text of the MD&A and tax footnote). Use the spreadsheet provided on Moodle to create a work-paper quality spreadsheet to answer this question. Copy the row labels below into the first worksheet of a new workbook (Name this worksheet SUMMARY). As you search for each item in the text of the PDF 10-K, make a note of the disclosure that contains each item (e.g., pretax income is in the income statement). The 10-K spreadsheet should contain a worksheet for each major table in the 10-K. Copy the worksheets with the relevant disclosures into your new workbook (I copied 14 worksheets). Rename each worksheet and clean up the formatting of each worksheet to make it easier to link the items in each worksheet to the SUMMARY worksheet. 2019-2018 2018-2017 Financial Statement Items 2019 2018 2017 % chg $ chg % chg $ chg MD&A Annual operating tax rate Effective tax rate Transition tax Financial Statements Pretax income Provision for income taxes Tax expense recorded in comprehensive income Deferred tax assets Income tax payable (current) Deferred tax liabilities Deferred tax expense Change in income taxes payable (SCF) Footnote Disclosures U.S. revenue Foreign revenue U.S. PP&E Foreign PP&E Excess tax benefit for stock compensation U.S. pretax income Foreign pretax income Current tax expense Deferred tax expense Effective tax rate DTA valuation allowance Net deferred tax asset Loss carryforwards Cash paid for taxes Beginning unrecognized tax benefit (UTB) Settlements with tax authorities Ending UTB UTB that would affect the ETR 5. Explain any significant changes in the items above (either look for any explanations provided by TXN or try to devise your own explanation based on data in the filings and your knowledge about accounting, general economic conditions, etc.). 6. Does the change in income taxes payable in the operating section of the SCF equal the change in income taxes payable on the balance sheet? If not, what may explain the difference (provide a general reason, not specific)? 7. Does deferred tax expense equal the change in net deferred tax assets and deferred tax liabilities for 2019? If not, what may explain the difference (provide a general reason, not specific)? 8. Prepare the journal entry to record TXN’s total income tax expense in 2019. Make sure to include all components of the tax expense. NOTE: Due to the aggregation of certain items in the financial statements, you may not be able to produce a balanced entry. 9. What reconciling item caused the largest reduction in TXN’s ETR in each year (2017-2019)? 10. What reconciling item caused the largest increase in TXN’s ETR in each year (2009-2011)? 11. TXN reports its ETR reconciliation in percentages. Convert the percentages to dollars of income tax expense. 12. Does the expense implied by the reconciling item “U.S. excess tax benefit for stock compensation” match the amount disclosed in the supplemental financing cash flow information on page 38? If not, what may explain the difference (provide a general reason, not specific)? 13. What were the two largest components of TXN’s deferred tax assets in 2019 and 2018? Explain why these items are deferred tax assets. 14. What were the two largest components of TXN’s deferred tax liabilities in 2019 and 2018? Explain why these items are deferred tax liabilities. 15. Where in the balance sheet (what line item) does TXN report its UTB? 16. By how much does TXN expect its UTB to change in 2020? What is the potential cause of this change? UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number 001-03761 TEXAS INSTRUMENTS INCORPORATED (Exact Name of Registrant as Specified in Its Charter) Delaware 75-0289970 (State of Incorporation) (I.R.S. Employer Identification No.) 12500 TI Boulevard, Dallas, Texas 75243 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code 214-479-3773 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $1.00 TXN The Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $107,187,939,993 as of June 30, 2019. 933,975,619 (Number of shares of common stock outstanding as of February 14, 2020) Part III hereof incorporates information