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Amgen Inc. (AMGN)
Analysis of Income Taxes
Difficulty: Advanced
- Income Tax Accounting Policy
- Income Tax Expense (Benefit)
- Effective Income Tax Rate (EITR)
- Components of Deferred Tax Assets and Liabilities
- Analyst Adjustments: Removal of Deferred Taxes
- Adjusted Ratios: Removal of Deferred Taxes (Summary)
- Adjusted Net Profit Margin
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Income Tax Accounting Policy
Amgen provides for income taxes based on pretax income and applicable tax rates in the various jurisdictions in which Amgen operates. Significant judgment is required in determining Amgen’s provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the bases of assets and liabilities, as well as for loss and tax credit carryforwards for financial reporting purposes and amounts recognized for income tax purposes. Amgen records a valuation allowance to reduce the deferred tax assets to the amount of future tax benefit that is more likely than not to be realized.
Amgen recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the consolidated financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits (UTBs) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. Amgen recognizes both accrued interest and penalties, where appropriate, related to UTBs in income tax expense.
Source: 10-K (filing date: 2019-02-13).
Income Tax Expense (Benefit)
Amgen Inc., income tax expense (benefit), continuing operations
US$ in millions
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Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
| Item | Description | The company |
|---|---|---|
| Current provision | Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. | Amgen Inc.’s current provision increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level. |
| Deferred provision (benefit) | Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. | Amgen Inc.’s deferred provision (benefit) declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level. |
| Provision for income taxes | Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. | Amgen Inc.’s provision for income taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Effective Income Tax Rate (EITR)
Amgen Inc., effective income tax rate (EITR) reconciliation
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
| Item | Description | The company |
|---|---|---|
| Effective tax rate, before 2017 Tax Act | Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. | Amgen Inc.’s effective tax rate, before 2017 Tax Act declined from 2016 to 2017 and from 2017 to 2018. |
Components of Deferred Tax Assets and Liabilities
Amgen Inc., components of deferred tax assets and liabilities
US$ in millions
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
| Item | Description | The company |
|---|---|---|
| Deferred income tax assets | Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. | Amgen Inc.’s deferred income tax assets declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level. |
| Net deferred income tax assets | Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. | Amgen Inc.’s net deferred income tax assets declined from 2016 to 2017 but then slightly increased from 2017 to 2018. |
| Deferred income taxes, net | Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. | Amgen Inc.’s deferred income taxes, net increased from 2016 to 2017 and from 2017 to 2018. |
Analyst Adjustments: Removal of Deferred Taxes
Amgen Inc., adjustments to financial data
US$ in millions
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
Amgen Inc., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Amgen Inc., adjusted ratios
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Amgen Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
| 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. |
Amgen Inc.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | Amgen Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Amgen Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Amgen Inc., Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
2018 Calculations
1 Net profit margin = 100 × Net income ÷ Product sales
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Product sales
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Amgen Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
2018 Calculations
1 Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =
2 Adjusted financial leverage = Total assets ÷ Adjusted stockholders’ equity
= ÷ =
| 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. |
Amgen Inc.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
2018 Calculations
1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | Amgen Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-19).
2018 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Amgen Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |