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a. Find the effective tax rate of the company for the fiscal year 2016 and 2017. Locate the schedule that
reconciles (i.e. explains the differences between) the statutory rate and the effective rate. Which one is higher?
Point out the two biggest contributors to the difference between effective and statutory rate and explain why
they cause the statutory rate to be higher (or lower) than the effective rate. (Please reproduce the schedule in
your project.)
Hint: the schedule is typically found in the footnote to financial statements.
b. Locate any disclosure related to the “Tax Cuts and Jobs Act of 2017”. (This is the tax law change that
reduces corporate tax rate from 35% to 21%.)
- How would the change in tax law affect the company’s cash flows in the future (2018, 2019, …)?
- Did the company recognize any gains/losses related to the change in tax law in fiscal 2017? If yes, how
much? - (For companies that recognize gains/losses related to the change in tax law only.) The tax law is not effective
until 2018. Why did the company need to recognize a gain/loss in 2017?
Sample Solution
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