Chapter 2

Asset and Liability Valuation

and Income Measurement

CHAPTER 2
ASSET AND LIABILITY VALUATION AND INCOME
MEASUREMENT
Solutions to Questions, Exercises and Problems, and Teaching Notes to Cases
2.1 Asset Valuation and Income Measurement. To maintain the equality of assets
with liabilities plus shareholders equity, changes in the valuation of assets must
generally affect some shareholders equity. For example, decreases in depreciable
assets to recognize depreciation expense also reduce retained earnings. Increases in
the valuation of marketable securities available for sale also increase other
comprehensive income. If one defines income to include both net income and
other comprehensive income, then asset valuation and income measurement directly
relate. If one defines income to mean just net income, a component of retained
earnings, then asset valuation and income measurement do not always directly
relate. Some changes in asset valuation must first go through other comprehensive
income. When the firm realizes those value changes in a market transaction, then
net income and retained earnings change.

2.2 Reliability versus Relevance. Reliability is an attribute of accounting information

that relates to the degree of subjectivity open to management to measure its amount.
The greater the potential and/or actual subjectivity, the lower the reliability. For
example, reporting assets at acquisition cost provides fewer opportunities to
management to bias the valuation than using current replacement costs. Thus,
acquisition cost valuations are generally more reliable than current replacement
costs. However, an investor desiring to measure the current value of a firm would
likely find current replacement cost valuations more relevant than acquisition cost
valuations. One goal of accounting standard setters is to find the optimal tradeoff
between reliability and relevance in their accounting standards.

2.3 Income Flows versus Cash Flows. The analysis below demonstrates that the
change in cash for the five years as a whole, other than the $100,000 cash
contribution by the owners, equals $17,000, which is the amount of net income for
the five years and the balance in retained earnings at the end of five years. Note
that the cash outflow to purchase the machine occurs at the beginning of the first
year, whereas depreciation on the machine occurs throughout the five years and the
remaining book value of the machine of $20,000 affects computation of the gain on
sale at the end of five years. Thus, the statement about the equivalence of cash
flows and earnings holds.
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Chapter 2
Asset and Liability Valuation
and Income Measurement

Common
Net
Transaction or Event
Cash
Equipment
Stock
Income
Cash Contributed by Owners..... + $ 100,000
+ $ 100,000
Purchase of Machine for Cash...
100,000 + $ 100,000
Recognition of Rent Revenue.... + 125,000
+ $125.000
Recognition of Operating
Expenses ..............................
30,000

30,000
Recognition of Depreciation......

80,000

80,000
Sale of Machine ........................ +
22,000
20,000
+
2,000
Totals ...................................
$ 117,000
$
0
$ 100,000
$ 17,000

2.4 Measurement of Acquisition Costs. Acquisition cost is $240,500 (= $250,000

invoice price $15,000 cash discount + $4,000 for the title + $1,500 to paint
companys name on the truck). The license fee of $800 and the insurance of $2,500
are not costs to prepare the truck for its intended use but costs to operate the truck
during its first year. These latter two costs are, therefore, prepayments that become
expenses of the first year.

2.5

Measurement of a Monetary Asset.

Balance, January 1, Year 4: $10 million x 9.81815 (Part a.)........... $ 98,181,500
Interest for Year 4: .08 x $98,181,500 ...........................................
7,854,520
Less Cash Received........................................................................
(10,000,000)
Balance, December 31, Year 4 (Part b.).......................................... $ 96,036,020
Interest for Year 5: .08 x $96,036,020 ...........................................
7,682,882
Less Cash Received........................................................................
(10,000,000)
Balance, December 31, Year 5 (Part c.) .......................................... $ 93,718,902

2.6

Computation of Income Tax Expense.

a. Taxes Currently Payable..............................................................
Plus Decrease in Deferred Tax Assets: $42,900 $38,700..........
Plus Increase in Deferred Tax Liabilities: $34,200 $28,600......
Income Tax Expense ...................................................................

$ 50,000
4,200
5,600
$ 59,800

b. Taxes Currently Payable..............................................................

Plus Decrease in Deferred Tax Assets: $42,900 $38,700..........
Less Decrease in Deferred Tax Liability: $58,600 $47,100 ......
Income Tax Expense ...................................................................

$ 50,000
4,200
(11,500)
$ 42,700

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Chapter 2
Asset and Liability Valuation
and Income Measurement

2.7

Computation of Income Tax Expense.

a. Taxes Currently Payable..............................................................
Less Increase in Deferred Tax Assets:
Beginning of Year: $24,600 $6,400 =
$ 18,200
End of Year: $27,200 $7,200 =
20,000 ..........
Less Decrease in Deferred Tax Liabilities: $18,900 $16,300....
Income Tax Expense ...................................................................
b. Taxes Currently Payable..............................................................
Less Increase in Deferred Tax Assets:
Beginning of Year: $24,600 $6,400 =
$ 18,200
End of Year: $27,200 $4,800 =
22,400 ..........
Less Decrease in Deferred Tax Liabilities: $18,900 $16,300....
Income Tax Expense ...................................................................

$ 35,000

(1,800)
(2,600)
$ 30,600
$ 35,000

(4,200)
(2,600)
$ 28,200

2.8 Effect of Valuation

Income Statement.
C
a. Year 4: 100,000
Year 5:

Year 6: + 180,000
+ 80,000

Method for Nonmonetary Asset on Balance Sheet and

+ N$A
+ 100,000

100,000

b. Year 4: 100,000

Year 5:

Year 6: + 180,000
+ 80,000

+ 100,000
+ 50,000
30,000
120,000

c. Year 4: 100,000 + 100,000

+ 50,000
Year 5:
30,000

+ 50,000
30,000

Year 6: + 180,000 120,000

+ 80,000
0

+ 60,000
+ 80,000

+ CC

+ AOCI

+ RE

+ 80,000
+ 80,000

+ 50,000
30,000
20,000

+ 80,000
+ 80,000

d. Net income over sufficiently long time periods equals cash inflows minus cash
outflows, other than cash transactions with owners. Wal-Mart acquired the land
for $100,000 and sold it for $180,000. Thus, the total net income is $80,000.
The three different methods of asset valuation and income measurement
recognize this $80,000 in different patterns over time but the total is the same.

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Chapter 2
Asset and Liability Valuation
and Income Measurement

2.9

Effect of Valuation Method for Monetary Asset on Balance Sheet and Income
Statement.
C
+ N$A
= L
+ CC
+ AOCI + RE
a. BSBOP 100,000 +180,000
+ 80,000
Year 7
+100,939 86,539
+ 14,400a
Year 8
+100,939 93,461
+ 7,478b
BSEOP +101,878
0
+101,878
b

BSBOP 100,000 +180,000

Year 7:
+100,939 86,539
1,699
Year 8:
+100,939 91,762
BSEOP +101,878
0

+ 80,000
+ 14,400 a
1,699c
+ 9,177d
+101,878

$14,400 = .08 x $180,000.

$7,478 = .08 x ($180,000 $86,539) plus an additional $1 due to rounding.
c
$1,699 = $91,762 ($180,000 $86,539).
d
$9,177 = .10 x $91,762 plus an additional $1 due to rounding.
b

c. Net income over sufficiently long time periods equals cash inflows minus cash
outflows, other than cash transactions with owners. Wal-Mart receives $101,878
net in cash from purchasing the land for $100,000 and selling it for $201,878 (=
$100,939 x 2). Problem 2.8 indicates that net income of Year 4 to Year 6
includes the $80,000 change in market value of the land as of the time of sale on
December 31, Year 6. The $21,878 difference between the cash received of
$201,878 and the market value of the land on December 31, Year 6, of $180,000
is income for Year 7 and Year 8. The valuation method in Part a. uses the 8
percent interest rate applicable to this note on December 31, Year 6, both to value
the note and to recognize interest revenue for both years. The valuation method
in Part b. uses the market interest rate for this note each year (8 percent for Year 7
and 10 percent for Year 8) to value the note and to recognize interest revenue and
holding gains and losses. These two methods report the same total income but in
a different pattern over time.

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Chapter 2
Asset and Liability Valuation
and Income Measurement

2.10 Effect of Valuation Method for Nonmonetary Asset on Balance Sheet and
Income Statement.
C
+ N$A = L
+ CC
+ AOCI + RE
a. (1)
100,000 +100,000
(2)
25,000
25,000
(3)
15,000
15,000
BS-EOP 100,000 + 60,000
40,000
(4)
20,000
20,000
BS-EOP 100,000 + 40,000
60,000
(5)
20,000
20,000
BS-EOP 100,000 + 20,000
80,000
+ 6,000
(6)
+ 26,000 20,000
BS-EOP 74,000
0
74,000
b. (1)
100,000
(2)
(3)
BS-EOP 100,000
(4)
(5)
BS-EOP 100,000
(6)
(7)
BS-EOP 100,000
(8)
+ 26,000
BS-EOP 74,000

+100,000
25,000
15,000
+ 60,000
20,000
+ 8,000
+ 48,000
24,000
+ 2,000
+ 26,000
26,000

25,000
15,000
40,000
20,000
8,000
52,000
24,000
2,000
74,000

74,000

c. Total expenses over sufficiently long time periods equal cash outflows, other
than cash transactions with owners. The negative $74,000 reflects the cash
outflow to acquire the equipment of $100,000 and the cash inflow to sell the
equipment for $26,000.

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Chapter 2
Asset and Liability Valuation
and Income Measurement

2.11 Effect of Valuation Method for Monetary Asset on Balance Sheet and Income
Statement.
C
+ N$A
= L
+ CC
+ AOCI + RE
a. (1)
30,000 + 30,000
(2)
+ 5,000 + 40,000
+ 45,000
30,000
30,000
+ 1,600a
(3)
+ 14,414 12,814b
BS-EOP 10,586 + 27,186
+ 16,600
(4)
+ 14,414 13,327d
+ 1,087c
BS-EOP + 3,828 + 13,859
+ 17,687
f
(5)
+ 14,414 13,859
555e
BS-EOP + 18,242 +
0
18,242
a

$1,600 = .04 x $40,000.

$12,814 = $14,414 $1,600.
c
$1,087 = .04 x $27,186.
d
$13,327 = $14,414 $1,087.
e
$555 = .04 x $13,859 plus an additional $1 due to rounding.
f
$13,859 = $14,414 $555.
b

b. (1)
(2)

30,000 +
+ 5,000 +

(3)
+ 14,414
(4)

BS-EOP 10,586 +
(5)
+ 14,414
(6)

BS-EOP + 3,828 +
(7)
+ 14,414
BS-EOP + 18,242

30,000
40,000
30,000
12,814b
384c
26,802
13,074e
382f
13,346
13,346h
0

+45,000
30,000
+ 1,600a
384c
+16,216
+ 1,340d
382f
+17,174
1,068g
+18,242

$1,600 = .04 x $40,000.

$12,814 = $14,414 $1,600.
c
$384 = $26,802 ($40,000 $12,814).
d
$1,340 = .05 x $26,802.
e
$13,074 = $14,414 $1,340.
f
$382 = $13,346 ($26,802 $13,074).
g
$1,068 = .08 x $13,346.
h
$13,346 = $14,414 $1,068.
b

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Chapter 2
Asset and Liability Valuation
and Income Measurement

c. Net income over sufficiently long time periods equals cash inflows minus cash
outflows, other than cash transactions with owners. The $18,242 balance in
retained earnings equals the cash inflows of $48,242 (= $5,000 + $14,414 +
$14,414 + $14,414) minus cash outflows of $30,000.

2.12 Interpreting Income Tax Disclosures.

a. Income before income taxes for financial reporting exceeded taxable income
because the net deferred tax liability increased between the end of Year 2 and
the end of Year 3. Note also that total income tax expense exceeds income
taxes currently payable, so Target deferred some tax payments to later years.
b. Income before income taxes for financial reporting exceeded taxable income
because the net deferred tax liability increased between the end of Year 3 and
the end of Year 4. In addition, total income tax expense exceeded income taxes
currently payable.
c. The deferral of tax payments in Year 3 and Year 4 results in an addition to net
income of $208 million and $94 million respectively when computing cash flow
from operations. Target did not pay as much income taxes as the subtraction for
income tax expense in the income statement would suggest.
d. Target recognizes insurance expense earlier for financial reporting than for tax
reporting, giving rise to a deferred tax asset for the future savings in income
taxes when actual losses materialize. The decline in the deferred tax asset for
self-insured benefits between the end of Year 2 and the end of Year 3 indicates
that Target paid out more in actual claims during Year 3 than it recognized as an
expense. The increase in the deferred tax asset for self-insured benefits between
the end of Year 3 and the end of Year 4 indicates that Target recognized more
expense than it paid in actual claims during Year 4.
e. Target recognizes these costs as expenses earlier for financial reporting than for
tax reporting, giving rise to a deferred tax asset for the future income taxes
savings when it sells the inventory items. The decline in the deferred tax assets
for inventory between the end of Year 2 and the end of Year 3 suggests that
inventories declined during Year 3, resulting in a larger expense for tax
reporting than for financial reporting. The increase in the deferred tax assets for
inventory between the end of Year 3 and the end of Year 4 suggests that
inventories increased during Year 4.
f. The deferred tax asset related to the health care obligation indicates that Target
has recognized more expenses cumulatively for financial reporting than
payments made to the health care plan. The slight increase in the deferred tax
assets for post-retirement health care between the end of Year 2 and the end of
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Chapter 2
Asset and Liability Valuation
and Income Measurement

Year 3 indicates that Target either grew the number of employees, improved
health care benefits, or experienced increased health care costs during Year 3.
The decrease in the deferred tax assets for post-retirement health care between
the end of Year 3 and the end of Year 4 suggests either a decline in the number
of employees, lower health care benefits, or lower health care costs. The
deferred tax liability related to pension indicates that Target has contributed
larger amounts cumulatively to its pension fund than it has recognized as
expenses for financial reporting. The growing amounts over time suggest that
Target has consistently grown the number of its employees or their retirement
benefits each year.
g. The deferred tax asset related to uncollectible accounts indicates that Target
recognizes losses for uncollectibles earlier for financial reporting than for tax
reporting. The deferred tax asset indicates the future saving in income taxes
that the firm will realize when it writes off actual uncollectible accounts. The
increasing amount for this deferred tax asset is consistent with growth in sales.
h. The deferred tax liability indicates that Target recognizes depreciation earlier
for tax reporting than for financial reporting. The increasing amounts for this
deferred tax liability suggests that Target increased its capital expenditures each
year and therefore had more depreciable assets in the early years of their lives
when accelerated depreciation exceeds straight-line depreciation than they have
depreciable assets in the later years of their lives when straight-line depreciation
exceeds accelerated depreciation.

2.13 Interpreting Income Tax Disclosures.

a. Book income exceeded taxable income for Year 3 because total income tax
expense exceeded income taxes currently payable. In addition, the net deferred
tax asset declined during Year 3, indicating that amounts previously included in
taxable income on which Nike paid taxes are now included in book income,
reducing taxes otherwise payable.
b. The answer for Year 4 is the same as for Year 3 in Part a. above.
c. The adjustment to net income to compute cash flow from operations is an
addition because the cash payment is not as large as the amount of income tax
expense.
d. Nike recognizes an expense or revenue reduction earlier for financial reporting
than for tax reporting. The delayed reduction in taxable income gives rise to the
payment of taxes in early years and a reduction in taxes in later years, resulting
in a deferred tax asset in between. The increasing deferred tax assets for both

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Chapter 2
Asset and Liability Valuation
and Income Measurement

sales returns and allowance for doubtful accounts indicate that Nikes sales
grew each year.
e. Nike recognizes deferred compensation expense earlier for financial reporting
than for tax reporting, giving rise to a future tax benefit which the firm will
realize when it pays out cash to a retirement fund. The increase in the deferred
tax asset for deferred compensation suggests that Nike increase the number of
employees or the deferred compensation benefits each year.
f. The amount of the deferred tax asset for foreign loss carryforwards increased
each year, suggesting that some foreign units continued to operate at a net loss.
The increase in the valuation allowance occurs either because of increased
foreign losses or because of an increased probability of not being able to realize
the benefits.
g . Nike recognizes depreciation earlier for tax reporting than for financial
reporting, thereby delaying taxable income and taxes payable. The increase in
the deferred tax liability for depreciation suggests that Nike increased its capital
expenditures each year, resulting in more assets in the early years of their
depreciable lives when tax depreciation exceeds book depreciation and less
assets in their later years when tax depreciation is less than book depreciation.
h. Nike recognizes foreign-source income earlier for financial reporting than for
tax reporting, thereby delaying the payment of taxes and creating a deferred tax
liability in the meantime.
i. Some of Nikes foreign units operate at a net loss, giving rise to a deferred tax
asset, while other units operate at a net profit, giving rise to a deferred tax
liability.

2.14 Interpreting Income Tax Disclosures.

a. Income before income taxes for financial reporting exceeded taxable income
because the net deferred tax liability increased between the end of Year 9 and
the end of Year 10. Ford deferred the payment of a portion of its income taxes
to later years. Note also that total income tax expense exceeds income taxes
currently payable, so that Ford delayed some tax payments to later years.
b. Ford reported a loss before income taxes for financial reporting, whereas the
positive amount of current income tax expense indicates that taxable income
was positive. Also supporting this conclusion is that the net deferred tax
liability decreased between the end of Year 10 and the end of Year 11. Ford
paid a portion of the income taxes that it had deferred in earlier years.

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Chapter 2
Asset and Liability Valuation
and Income Measurement

c. The deferral of tax payments during Year 10 results in an addition to net income
of $1,675 million when computing cash flow from operations. Ford did not pay
as much in income taxes as the subtraction for income tax expense in the
income statement would suggest. The reversal of the deferred tax liability
during Year 11 results in a subtraction from net income when computing cash
flow from operations. The credit of $2,151 million for income taxes in the
income statement did not save Ford that amount in cash. Ford actually paid
$125 million of income taxes. The subtraction of $2,276 million from net
income coverts the presumed saving of $2,151 million to a payment of $125
million.
d. The deferred tax asset for employee benefit plans indicates that Ford recognizes
employee benefit expenses earlier for financial reporting than for tax reporting.
The continual increase in the deferred tax asset related to employee benefit
plans indicates that the expense recognized for financial reporting exceeded the
deduction recognized for tax purposes each year. Ford may have increased the
number of workers or provided larger benefits, so that originating temporary
differences exceeded reversing temporary differences each year for this item.
e. The deferred tax asset for dealer and customer allowances and claims indicates
that Ford recognizes expenses for this item earlier for financial reporting than
for tax reporting. The continual decrease in the deferred tax asset related to this
item indicates that payments made for allowance and claims exceeded estimated
provisions recognized for financial reporting each year. That is, reversing
temporary differences exceeded originating temporary differences. Ford may
have experienced decreased sales, so that new provisions were less than
allowances and claims made each year. Ford may also have improved the
quality of its vehicles and found that it did not need to make as large a provision
for these allowances and claims than it found necessary to make in earlier years.
f. The deferred tax asset for credit losses indicates that Ford recognizes expenses
for uncollectible accounts earlier for financial reporting than for tax reporting.
The continual increase in the deferred tax asset suggests either worsened credit
risk or an inappropriate delay in writing off customers accounts as they become
uncollectible.
g . The deferred tax liability for depreciation indicates that Ford recognizes
depreciation earlier for tax reporting than for financial reporting. The continual
increase in the deferred tax liability suggests that Ford made increasing amounts
of capital expenditures, such that it had more assets in the early years of their
lives for which tax depreciation exceeded book depreciation than it had assets in
the later years of their lives for which book depreciation exceeded tax
depreciation.

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Chapter 2
Asset and Liability Valuation
and Income Measurement

h. The deferred tax liability indicates that Ford recognizes revenue from these
leases earlier for financial reporting than for tax reporting. It appears that Ford
increased significantly the amount of vehicles under leases during Year 10
because originating temporary differences substantially exceeded reversing
timing differences in that year. During Year 11, the deferred tax liability
relating to finance receivables decreased, indicating that reversing temporary
differences exceeded originating temporary differences. Ford likely reduced
significantly the amount of new lease activity during Year 11, consistent with
the large net loss realized that year.

2.15 Analyzing Transactions.

C
+ N$A =
L
+ CC
BS-BOP
a.
+ 50,000
+ 50,000
b.
5,000 + 35,000
+30,000
c.
+ 40,000
+40,000
d.
+ 65,000
30,000
e.
15,000
f.
+ 45,000 45,000
g .
28,000
28,000
h.
7,000
i.
+ 4,000
j.
2,400
IBT
k.
1,440
+ 1,200
BS-EOP
43,160 + 58,000
47,200 + 50,000

2.16 Analyzing Transactions.

a.
C
+ N$A
BS-BOP
(1)
100,000 +100,000
(2)
10,000
IBT
(3)
+ 4,000
OCI
BS-EOP 100,000 + 94,000
(4)
+ 94,000 90,000
IBT
(5)
+ 2,400 4,000
NI
BS-EOP 3,600
0

+ CC

+ AOCI

+ 65,000
30,000
15,000

+ AOCI

10,000
10,000
4,000
6,000
6,000
10,000

4,000
0
2-11

+ RE

7,000
4,000
2,400
6,600
2,640
3,960

+ RE

6,000
6,000
+ 2,400
3,600
3,600

Chapter 2
Asset and Liability Valuation
and Income Measurement

b.

+ N$A

BS-BOP
(1)
(2)
(3)
(4)
(5)
(6)
IBT
(7)
NI
BS-EOP
a

+ CC

+ AOCI

+500,000
400,000
10,000

+ RE
+500,000
400,000
10,000
20,000

+ 20,000
3,000
+ 3,000
8,000

8,000
a

35,600 + 7,600

+
+

43,600 + 97,600

+ 12,000

70,000
28,000
42,000
42,000

$35,600 = .40($500,000 - $400,000 - $3,000 - $8,000).

$7,600 = .40($10,000 + $20,000 - $3,000 - $8,000).

c.
BS-BOP
(1)
(2)
IBT
(3)
NI
BS-EOP
(4)
IBT
(5)
NI
BSEOP
(6)
IBT
(7)
NI
BS-EOP

+ N$A

68,058

+68,058
+ 5,445

+73,503
+ 5,880

2,352

72,588
+ 83,683

+79,383
79,383

1,720

+ 9,375

+ CC

+ AOCI

+ RE

+
+

+
+
+
+

+
+
+
+

+
+

2,178

70,236

$5,445 = .08 x $68,058.

$5,880 = .08 x $73,503.
c
$4,300 = $83,683 $79,383.
b

2-12

5,445a
5,445
2,178
3,267
3,267
5,880b
5,880
2,352
3,528
6,795
4,300c
4,300
1,720
2,580
9,375

Chapter 2
Asset and Liability Valuation
and Income Measurement

Integrative Case 2.1: Starbucks

a. Taxable income exceeded book income before income taxes for Year 3 because
income taxes currently payable exceeded total income tax expense. Also, the net
deferred tax asset increased between the end of Year 2 and the end of Year 3,
indicating that Starbucks prepaid taxes relative to book income.
b. The answer to Part b. is the same as for Part a. above.
c. Starbucks will report a subtraction from net income when computing cash flow
from operations for the income taxes paid in excess of the amount reported as
income tax expense in the income statement. Another way to understand this
adjustment is to note that the current portion of income tax expense exceeds total
income tax expense.
d . Starbucks recognized the losses for financial reporting as soon as the losses
became apparent, but cannot claim a tax deduction until later when they sell the
securities and realize the loss.
e. Starbucks recognizes deferred compensation expense for financial reporting earlier
than it claims an income tax deduction. When Starbucks contributes cash to a
retirement fund in later years, it can claim an income tax deduction. The
increasing amount for the deferred tax asset related to deferred compensation
suggests that the firm grew continually over the two-year period and/or increased
the deferred compensation benefits.
f. Starbucks recognizes rent expense earlier for financial reporting than for income
tax reporting in order for the firm to report a deferred tax asset. It is likely that
Starbucks pays some of its rentals after the rental period. Perhaps the rental fee
includes a portion based on revenue for a period. Starbucks cannot pay this
amount until after the end of the period, when it can compute the rental due.
g. Note that the valuation allowance at the end of each year is less than the deferred
tax asset for equity investments each year. Thus, Starbucks expects to realize
some, but not all, of the tax benefits of these losses. The deferred tax asset for
equity investments increased between the end of Year 2 and the end of Year 3 and
so did the valuation allowance. The deferred tax asset for equity investments
declined between the end of Year 3 and the end of Year 4 and so did the valuation
allowance. Thus, there seems to be a relation between the amount of the
investment losses and the valuation allowance.
h. Depreciation recognized each year and cumulatively for tax reporting exceeded
depreciation recognized for financial reporting. Starbucks likely has more
depreciable assets in the early years of their depreciable lives when accelerated
depreciation exceeds straight-line depreciation than it has depreciable assets in the
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and Income Measurement

later years of their lives when straight-line depreciation exceeds accelerated

depreciation. The increasing amount of deferred tax liabilities related to
depreciation temporary differences suggests that Starbucks increased its capital
expenditures each year.

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