Illustrate what will be the impact of the adjustment

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Reference no: EM13129348

Assume the state of AZ raises its corporate tax rate to help cover the budget shortfall, this increase causes the combined federal and state tax rate to increase from 40% to 42% for AZ based companies.

Assume the rate increase is enacted June 30, 2011 and backdated so that it is effective Jan.1, 2011.

Happy company is a AZ based company that had net deferred tax liabilities of $300 million at 1/1/11, all originating at the "old" 40% rate. Will the company make any adjustment because of the tax rate increase? If so, what will be the impact of the adjustment on 2011 tax expense and net income?

Reference no: EM13129348

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