Might deliberately create too large a valuation

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might deliberately create too large a valuation allowance in one or more prior years and use it as a cookie jar reserve to boost income in future periods. We want to assess the details of the valuation account and changes therein from compam footnotes and from the MD&A. Effect of Deferred Tax Asset Valuation Account on Tax Expense J EXHIBIT 5.7 I"Pfi~er ($1nilliOns) Change in valuation allowance . Impact of valuation allowance change on net income ........... •..• ...................... Income before tax . . . .. . . Tax expense . Effective tax rate (Tax expense/Income before tax) . Tax expense before change in valuation account ............... •.. ' . Effective tax rate before change in valuation account '.' .. 2010 $ 541 $ (541) $9,422 $1,124 11.9% $ 583 6.2%
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Income Statement Differences Module 5 I Revenue Recognition and Operating Income 5-26 - ws companies to classify income statement items by nature (materials, labor, etc.) rather function (cost of goods sold, selling expenses, etc.). Finmeccanica S.p.A. is an Italian --..-"':"=,-.l~'ring conglomerate that operates in the defense, aerospace, transport and energy sec- 2010 IFRS income statement classifies items by nature. "_I!C(:anica SpA, Consolidated Income Statement (€ millions) 2010 €18,695 627 (6,316) (5,878) (4,772) (785) (801) (176) 638 1,232 850 (1,202) (14) 866 (309) 557 493 64 operating income . -:Eterials and consumables used ............... ........................... -~.~~= of services . ~=neI costs . _-.-r.:>=tJ·on, depreciation and impairment . operating expenses . in inventories of work in progress, semi-finished and finished goods . ':lSIionmed by the Group and capitalized . income . costs . I profit (loss) of equity accounted investments . before taxes ..................................................... ..... taxes . -::IOfit . = holders of the Company . , interests , . fit , , . . . . . . . . . . . . . . . . 557 se Finmeccanica classifies its income statement items by nature, there is no line item for of goods sold. Instead, the manufacturing and inventory costs recognized during the period orted according to their nature (raw materials and consumables used, personnel costs, operating expenses) along with the amount of the net change in inventories for the period. - see that other than raw materials and consumables used and the net change in inventories, all perating costs combine product and period costs. For example, personnel costs include the 'es and wages for all staff from the manufacturing employees to the CEO. ID-MODULE REVIEW 2 efer to the Merck & Co., Inc., 2010 income statement in Mid-Module Review 1. Merck pro- - es the following additional information in footnotes to its lfl-K. Taxes on income consisted of: Years Ended December 31 ($ in millions) 2010 2009. 2008 $ 399 $ (55) $1,054 1,446 495 292 (82) 7 123 -- 1,763 447 1,469 764 2,095 419 (1,777) (437) 56 (79) 163 55 (1,092) 1,821 530 -- -- $ 671 $2,268 $1,999 Current provision Federal , . Foreign . State ..... ............................ Deferred provision Federal . Foreign . State . -
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5-27 Module 5 I Revenue Recognition and Operating Income L04 Explainhow foreign currency fluctuations affect the income statement. Required 1. What is the total income tax expense that Merck reports in its 2010 income statement?
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