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Microsoft Excel LibreOffice Calc


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Income tax expense includes U.S. (federal and state) and foreign income taxes. Tax legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act") includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, Amazon.com intends to continue to invest most or all of these earnings, as well as the capital in these subsidiaries, indefinitely outside of the U.S. and does not expect to incur any significant, additional taxes related to such amounts.

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent Amazon.com believes they will not be realized. Amazon.com considers many factors when assessing the likelihood of future realization of the deferred tax assets, including the recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to Amazon.com for tax reporting purposes, and other relevant factors.

Amazon.com utilizes a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. Amazon.com considers many factors when evaluating the tax positions and estimating the tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. Amazon.com includes interest and penalties related to the tax contingencies in income tax expense.

Source: 10-K (filing date: 2018-02-02).


Income Tax Expense (Benefit)

Amazon.com Inc., income tax expense (benefit), continuing operations

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
U.S. Federal hidden hidden hidden hidden hidden
U.S. State hidden hidden hidden hidden hidden
International hidden hidden hidden hidden hidden
Current taxes hidden hidden hidden hidden hidden
U.S. Federal hidden hidden hidden hidden hidden
U.S. State hidden hidden hidden hidden hidden
International hidden hidden hidden hidden hidden
Deferred taxes hidden hidden hidden hidden hidden
Provision for income taxes, net hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

Item Description The company
Current taxes Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Amazon.com Inc.'s current taxes increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Deferred taxes Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Amazon.com Inc.'s deferred taxes declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Provision for income taxes, net Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Amazon.com Inc.'s provision for income taxes, net increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Effective Income Tax Rate (EITR)

Amazon.com Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Federal statutory tax rate hidden hidden hidden hidden hidden
Effective tax rate hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

Item Description The company
Effective tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Amazon.com Inc.'s effective tax rate declined from 2015 to 2016 and from 2016 to 2017.

Components of Deferred Tax Assets and Liabilities

Amazon.com Inc., components of deferred tax assets and liabilities

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Loss carryforwards U.S., Federal/States hidden hidden hidden hidden hidden
Loss carryforwards, Foreign hidden hidden hidden hidden hidden
Accrued liabilities, reserves, & other expenses hidden hidden hidden hidden hidden
Stock-based compensation hidden hidden hidden hidden hidden
Deferred revenue hidden hidden hidden hidden hidden
Assets held for investment hidden hidden hidden hidden hidden
Depreciation & amortization hidden hidden hidden hidden hidden
Other items hidden hidden hidden hidden hidden
Tax credits hidden hidden hidden hidden hidden
Gross deferred tax assets hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden
Deferred tax assets, net of valuation allowance hidden hidden hidden hidden hidden
Depreciation & amortization hidden hidden hidden hidden hidden
Acquisition related intangible assets hidden hidden hidden hidden hidden
Other items hidden hidden hidden hidden hidden
Deferred tax liabilities hidden hidden hidden hidden hidden
Net deferred tax assets (liabilities), net of valuation allowance hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Amazon.com Inc.'s gross deferred tax assets increased from 2015 to 2016 and from 2016 to 2017.
Deferred tax assets, net of valuation allowance Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Amazon.com Inc.'s deferred tax assets, net of valuation allowance increased from 2015 to 2016 but then slightly declined from 2016 to 2017.
Net deferred tax assets (liabilities), net of valuation allowance Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Amazon.com Inc.'s net deferred tax assets (liabilities), net of valuation allowance increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Analyst Adjustments: Removal of Deferred Taxes

Amazon.com Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Total Liabilities
Total liabilities (as reported) hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax liabilities, net hidden hidden hidden hidden hidden
Total liabilities (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Stockholders' Equity
Total stockholders' equity (as reported) hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden
Total stockholders' equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income (loss)
Net income (loss) (as reported) hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Net income (loss) (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).


Amazon.com Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Amazon.com Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Amazon.com Inc.'s adjusted net profit margin improved from 2015 to 2016 and from 2016 to 2017.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Amazon.com Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Amazon.com Inc.'s adjusted ROE improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Amazon.com Inc.'s adjusted ROA improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

Amazon.com Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

2017 Calculations

1 Net profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Amazon.com Inc.'s adjusted net profit margin improved from 2015 to 2016 and from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden
Total stockholders' equity hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden
Adjusted total stockholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

2017 Calculations

1 Financial leverage = Total assets ÷ Total stockholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Total assets ÷ Adjusted total stockholders' equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Amazon.com Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) hidden hidden hidden hidden hidden
Total stockholders' equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) hidden hidden hidden hidden hidden
Adjusted total stockholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

2017 Calculations

1 ROE = 100 × Net income (loss) ÷ Total stockholders' equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted total stockholders' equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Amazon.com Inc.'s adjusted ROE improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30), 10-K (filing date: 2014-01-31).

2017 Calculations

1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income (loss) ÷ Total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Amazon.com Inc.'s adjusted ROA improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.