Acct Iii Course Project

Topics: Pension, Tax, Generally Accepted Accounting Principles Pages: 7 (2157 words) Published: May 24, 2013
Course Project:
Financial Statement Analysis of Texas Instruments, Inc.
Amanda McAdams
Week 6
Intermediate Accounting III
Professor:  James Ridilla

Table of Contents
Deferred Taxes3-5
Retirement plan 5-6
Share-based Compensation6
Earnings per Share6-7
Cash Flow Statement7-8
Overall Analysis8

Texas Instruments is famous for handheld scientific calculators; yet they are a company that has their hand in so much more! TI designs and sells semiconductors to electronics manufacturers globally. Operations began in 1930 and have since grown to include operations in 35 countries. TI is segmented into four distinctive markets: analog, embedded processing, wireless, and other semi-conductors. Additionally, TI was the fourth largest semiconductor company in 2012.

TI’s main business is producing semi-conductors which are electronic components that serve as the tiny building blocks inside modern electronic systems and equipment. Analog semiconductors change real-world signals - such as sound, temperature, pressure or images - by conditioning them, amplifying them and often converting them to a stream of digital data that can be processed by other semiconductors, such as digital signal processors. TI’s embedded processing products include DSPs and microcontrollers. DSPs perform mathematical computations (i.e. the scientific calculators they are most famous for) almost instantaneously to process or improve digital data. Lastly, the newest segment of TI is the wireless segment; which includes application processors, connectivity products and baseband products. Taxes

The differences in what a given company can deduct for tax purposes and what a company can record for accounting purposes are referred to as either a deferred tax liability or deferred tax asset. Deferred tax situations are due to discrepancies in what is on a company’s books and what is actually on their income tax statements and arise from common accounting situations like prepaid income and revenues collected now that will appear on later financial statements.

In 2011 TI states “In addition, we are subject to laws and regulations in various jurisdictions that determine how much profit has been earned and when it is subject to taxation in that jurisdiction…we have deferred tax assets on our balance sheet. Each quarter we forecast our tax liability based on our forecast of our performance for the year. If that performance forecast changes, our forecasted tax liability will change (TI).” Essentially, TI realizes that tax rates in certain counties, states, and countries can and do change often which result in a deferred tax asset on the financial statements. As stated in the notes of the financial statements: “As of December 31, 2011, net deferred income tax assets of $888 million and $1.61 billion were presented in the balance sheet, based on tax jurisdiction, as deferred income tax assets of $1.50 billion and $1.70 billion and deferred income tax liabilities of $607 million and $86 million” (TI). The decrease in deferred income tax from year to year appears to be due to the purchase of National. On September 23, 2011, TI acquired National Semiconductor Corporation. TI lists other reasons for deferred tax assets: Inventories, deferred loss and tax credit carry forwards, stock-based compensation, postretirement benefit costs and accrued expenses. TI also lists deferred income tax liabilities: acquisition-related intangibles, accrued retirement costs, and international earnings. Both result in a net deferred tax of 750 million for 2012 and 888 million for 2011.

Differences between pretax accounting income and taxable income and between the reported amount of an asset or liability in the financial statements and its tax basis which will “reverse” in later years are considered temporary differences (Spiceland). Permanent...
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