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McDonald's Corp. (MCD) | Analysis of Income Taxes

Income Tax Expense (Benefit)

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McDonald's Corp., income tax expense (benefit), continuing operations

USD $ in thousands

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  12 months ended Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
U.S. federal
U.S. state
Outside the U.S.
Current tax provision
U.S. federal
U.S. state
Outside the U.S.
Deferred tax provision (benefit)
Provision for income taxes

Source: Based on data from McDonald's Corp. Annual Reports

Item Description The company
Current tax provision The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations. McDonald's Corp.'s current tax provision declined from 2008 to 2009 but then increased from 2009 to 2010 exceeding 2008 level.
Deferred tax provision (benefit) The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations. McDonald's Corp.'s deferred tax provision (benefit) increased from 2008 to 2009 but then declined significantly from 2009 to 2010.
Provision for income taxes The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy. McDonald's Corp.'s provision for income taxes increased from 2008 to 2009 and from 2009 to 2010.

Effective Income Tax Rate (EITR)

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McDonald's Corp., effective income tax rate (EITR) reconciliation

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
Statutory U.S. federal income tax rate % % % % %
State income taxes, net of related federal income tax benefit % % % % %
Benefits and taxes related to foreign operations % % % % %
Completion of federal tax audit % % % % %
Latam transaction % % % % %
Other, net % % % % %
Effective income tax rates % % % % %

Source: Based on data from McDonald's Corp. Annual Reports

Item Description The company
Effective income tax rates A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations. McDonald's Corp.'s effective income tax rates declined from 2008 to 2009 and from 2009 to 2010.

Deferred Tax Assets (Liabilities), Net

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McDonald's Corp., deferred tax assets (liabilities), net

USD $ in thousands

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
Property and equipment
Employee benefit plans
Intangible assets
Deferred foreign tax credits
Capital loss carryforwards
Operating loss carryforwards
Indemnification liabilities
Other
Deferred tax assets before valuation allowance
Valuation allowance
Deferred tax assets
Property and equipment
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)

Source: Based on data from McDonald's Corp. Annual Reports

Item Description The company
Deferred tax assets before valuation allowance The sum of the tax effects as of the balance sheet date of the amounts of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws (before the valuation allowance, if any, to reduce such sum amount to net realizable value). Includes any tax benefit realized in deferred tax assets for significant impacts of tax planning strategies. McDonald's Corp.'s deferred tax assets before valuation allowance declined from 2008 to 2009 but then increased from 2009 to 2010 exceeding 2008 level.
Deferred tax assets The aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. McDonald's Corp.'s deferred tax assets declined from 2008 to 2009 but then increased from 2009 to 2010 exceeding 2008 level.
Net deferred tax assets (liabilities) For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods. McDonald's Corp.'s net deferred tax assets (liabilities) declined from 2008 to 2009 but then slightly increased from 2009 to 2010.

February 7, 2012

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