Question

Starbucks Corporation recognized the following amounts in a recent annual report on Form 10-K.

$ millions	October 2, 2016	September 27, 2015
Deferred tax asset	$1,651.1	$1,660.0
Valuation allowance	70.3	143.7
Net income attributable to Starbucks	2,817.7	2,757.4

a. Calculate the deferred tax asset valuation allowance as a percentage of deferred tax assets for fiscal years 2016 and 2015.

• Note: Round your percentages to two decimal places (for example, enter 3.57% for 3.565%).

2016
2015

b. Based on your results in part a, does it appear that the company considers deferred tax benefits to be realized at a higher or lower rate than 2015?

Answer 1

Year (Amount in $ millions)	2016	2015
Valuation allowance	$               70.30	$           143.70
Divided by: Deferred tax asset	$         1,651.10	$       1,660.00
Deferred tax asset valuation allowance as a percentage of deferred tax assets	4.26%	8.66%
Deferred tax asset valuation allowance shows amount of deferred tax asset will not realised in the future.
Lower rate of valuation allowance indicates deferred tax asset will realised at higher rate.
Deferred tax benefits to be realized at a higher than 2015.		higher