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Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

The provision for income taxes includes federal, state, local and foreign taxes. Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. Biogen evaluates the realizability of the deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.

All tax effects associated with intercompany transfers of assets within Biogen's consolidated group, both current and deferred, are recorded as a prepaid tax or deferred charge and recognized through the consolidated statements of income when the asset transferred is sold to a third party or otherwise recovered through amortization of the asset's remaining economic life. If the asset transferred becomes impaired, for example through the obsolescence of inventory or discontinuation of a research program, Biogen will expense any remaining deferred charge or prepaid tax.

Biogen accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. Biogen evaluates uncertain tax positions on a quarterly basis and considers various factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position. Biogen also accrues for potential interest and penalties related to unrecognized tax benefits in income tax expense.

Source: 10-K (filing date: 2018-02-01).


Income Tax Expense (Benefit)

Biogen Inc., income tax expense (benefit), continuing operations

USD $ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Federal hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden
Current hidden hidden hidden hidden hidden
Federal hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden
Deferred hidden hidden hidden hidden hidden
Income tax expense hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Biogen Inc.'s current increased from 2015 to 2016 and from 2016 to 2017.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Biogen Inc.'s deferred declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Income tax expense Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Biogen Inc.'s income tax expense increased from 2015 to 2016 and from 2016 to 2017.

Effective Income Tax Rate (EITR)

Biogen 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
U.S. federal statutory tax rate hidden hidden hidden hidden hidden
State taxes hidden hidden hidden hidden hidden
Taxes on foreign earnings hidden hidden hidden hidden hidden
Credits and net operating loss utilization hidden hidden hidden hidden hidden
Purchased intangible assets hidden hidden hidden hidden hidden
Manufacturing deduction hidden hidden hidden hidden hidden
2017 Tax Act hidden hidden hidden hidden hidden
Impairment of ZINBRYTA related tax assets hidden hidden hidden hidden hidden
Other permanent items hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden
Effective tax rate hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

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

Components of Deferred Tax Assets and Liabilities

Biogen Inc., components of deferred tax assets and liabilities

USD $ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Tax credits hidden hidden hidden hidden hidden
Inventory, other reserves, and accruals hidden hidden hidden hidden hidden
Intangibles, net hidden hidden hidden hidden hidden
Net operating loss hidden hidden hidden hidden hidden
Share-based compensation hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden
Deferred tax assets, gross hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden
Deferred tax assets hidden hidden hidden hidden hidden
Purchased intangible assets hidden hidden hidden hidden hidden
Unrealized gain on investments and cumulative translation adjustment hidden hidden hidden hidden hidden
Depreciation, amortization and other hidden hidden hidden hidden hidden
Deferred tax liabilities hidden hidden hidden hidden hidden
Deferred tax assets and liabilities, net hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

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

Analyst Adjustments: Removal of Deferred Taxes

Biogen Inc., adjustments to financial data

USD $ in thousands

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 Biogen Inc. Shareholders' Equity
Total Biogen Inc. shareholders' equity (as reported) hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden
Total Biogen Inc. shareholders' equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income Attributable To Biogen Inc.
Net income attributable to Biogen Inc. (as reported) hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Net income attributable to Biogen Inc. (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).


Biogen Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Biogen 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: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Biogen Inc.'s adjusted net profit margin deteriorated 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.
Biogen Inc.'s adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Biogen Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Biogen Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

Biogen 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 thousands)
Net income attributable to Biogen Inc. hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted net income attributable to Biogen Inc. hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

2017 Calculations

1 Net profit margin = 100 × Net income attributable to Biogen Inc. ÷ Revenues
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Biogen Inc. ÷ Revenues
= 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. Biogen Inc.'s adjusted net profit margin deteriorated 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 thousands)
Total assets hidden hidden hidden hidden hidden
Total Biogen Inc. shareholders' equity hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Total assets hidden hidden hidden hidden hidden
Adjusted total Biogen Inc. shareholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

2017 Calculations

1 Financial leverage = Total assets ÷ Total Biogen Inc. shareholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Total assets ÷ Adjusted total Biogen Inc. shareholders' 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.
Biogen Inc.'s adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017.

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 thousands)
Net income attributable to Biogen Inc. hidden hidden hidden hidden hidden
Total Biogen Inc. shareholders' equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted net income attributable to Biogen Inc. hidden hidden hidden hidden hidden
Adjusted total Biogen Inc. shareholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

2017 Calculations

1 ROE = 100 × Net income attributable to Biogen Inc. ÷ Total Biogen Inc. shareholders' equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income attributable to Biogen Inc. ÷ Adjusted total Biogen Inc. shareholders' equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Biogen Inc.'s adjusted ROE deteriorated from 2015 to 2016 and 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 thousands)
Net income attributable to Biogen Inc. 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 thousands)
Adjusted net income attributable to Biogen Inc. 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: 2018-02-01), 10-K (filing date: 2017-02-02), 10-K (filing date: 2016-02-03), 10-K (filing date: 2015-02-04), 10-K (filing date: 2014-02-06).

2017 Calculations

1 ROA = 100 × Net income attributable to Biogen Inc. ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income attributable to Biogen Inc. ÷ 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. Biogen Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.