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Microsoft Excel LibreOffice Calc

Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Broadcom accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Broadcom recognizes net deferred tax assets to the extent Broadcom believes these assets will more likely than not be realized. In making such determination, Broadcom considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. If Broadcom determines that Broadcom is able to realize the deferred income tax assets in the future in excess of their net carrying values, Broadcom adjusts the valuation allowance and reduces the provision for income taxes. Likewise, if Broadcom determines that Broadcom is not be able to realize all or part of the net deferred tax assets, Broadcom increases the provision for income taxes in the period such determination is made.

Broadcom accounts for uncertainty in income taxes in accordance with the applicable accounting guidance on income taxes. This guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

Source: Broadcom Inc., Annual Report


Income Tax Expense (Benefit)

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

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Domestic hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Current tax expense hidden hidden hidden hidden hidden hidden
Domestic hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Deferred tax expense (benefit) hidden hidden hidden hidden hidden hidden
Provision for income taxes hidden hidden hidden hidden hidden hidden

Source: Based on data from Broadcom Inc. Annual Reports

Item Description The company
Current tax expense 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. Broadcom Inc.'s current tax expense declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Deferred tax expense (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. Broadcom Inc.'s deferred tax expense (benefit) increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
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. Broadcom Inc.'s provision for income taxes increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Effective Income Tax Rate (EITR)

Broadcom Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Statutory tax rate in Singapore hidden% hidden% hidden% hidden% hidden% hidden%
Foreign income taxed at different rates hidden% hidden% hidden% hidden% hidden% hidden%
Tax holidays and concessions hidden% hidden% hidden% hidden% hidden% hidden%
Other, net hidden% hidden% hidden% hidden% hidden% hidden%
Valuation allowance hidden% hidden% hidden% hidden% hidden% hidden%
Actual tax rate on income (loss) before income taxes hidden% hidden% hidden% hidden% hidden% hidden%

Source: Based on data from Broadcom Inc. Annual Reports

Item Description The company
Actual tax rate on income (loss) before income taxes 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. Broadcom Inc.'s actual tax rate on income (loss) before income taxes declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.

Components of Deferred Tax Assets and Liabilities

Broadcom Inc., components of deferred tax assets and liabilities

USD $ in millions

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Depreciation and amortization hidden hidden hidden hidden hidden hidden
Inventory hidden hidden hidden hidden hidden hidden
Trade accounts hidden hidden hidden hidden hidden hidden
Employee benefits hidden hidden hidden hidden hidden hidden
Employee share awards hidden hidden hidden hidden hidden hidden
Net operating loss carryovers and credit carryovers hidden hidden hidden hidden hidden hidden
Other deferred income tax assets hidden hidden hidden hidden hidden hidden
Gross deferred income tax assets hidden hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden hidden
Deferred income tax assets hidden hidden hidden hidden hidden hidden
Depreciation and amortization hidden hidden hidden hidden hidden hidden
Notes receivable hidden hidden hidden hidden hidden hidden
Other deferred income tax liabilities hidden hidden hidden hidden hidden hidden
Foreign earnings not indefinitely reinvested hidden hidden hidden hidden hidden hidden
Deferred income tax liabilities hidden hidden hidden hidden hidden hidden
Net deferred income tax assets (liabilities) hidden hidden hidden hidden hidden hidden

Source: Based on data from Broadcom Inc. Annual Reports

Item Description The company
Gross deferred income tax assets 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. Broadcom Inc.'s gross deferred income tax assets increased from 2015 to 2016 and from 2016 to 2017.
Deferred income 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. Broadcom Inc.'s deferred income tax assets increased from 2015 to 2016 and from 2016 to 2017.
Net deferred income 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. Broadcom Inc.'s net deferred income tax assets (liabilities) declined from 2015 to 2016 and from 2016 to 2017.

Deferred Tax Assets and Liabilities, Classification

Broadcom Inc., deferred tax assets and liabilities, classification

USD $ in millions

Microsoft Excel LibreOffice Calc

Source: Based on data from Broadcom Inc. Annual Reports

Item Description The company
Current deferred income tax assets (in Other current assets) The current portion of 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; after deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. An unrecognized tax benefit that is directly related to a position taken in a tax year that results in a net operating loss carryforward should be presented as a reduction of the related deferred tax asset.
Current deferred income tax liabilities (in Other current liabilities) Represents the current portion of deferred tax liabilities, which result from applying the applicable tax rate to net taxable temporary differences pertaining to each jurisdiction to which the entity is obligated to pay income tax. A current taxable temporary difference is a difference between the tax basis and the carrying amount of a current asset or liability in the financial statements prepared in accordance with generally accepted accounting principles. In a classified statement of financial position, an enterprise shall separate deferred tax liabilities and assets into a current amount and a noncurrent amount. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference.
Non-current deferred income tax assets (in Other long-term assets) The noncurrent portion as of the balance sheet date of the aggregate carrying amount 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; after the valuation allowance, if any, to reduce such amount to net realizable value. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. Broadcom Inc.'s non-current deferred income tax assets (in Other long-term assets) increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Non-current deferred income tax liabilities (in Other long-term liabilities) Represents the noncurrent portion of deferred tax liabilities, which result from applying the applicable tax rate to net taxable temporary differences pertaining to each jurisdiction to which the entity is obligated to pay income tax. A noncurrent taxable temporary difference is a difference between the tax basis and the carrying amount of a noncurrent asset or liability in the financial statements prepared in accordance with generally accepted accounting principles. In a classified statement of financial position, an enterprise shall separate deferred tax liabilities and assets into a current amount and a noncurrent amount. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. Broadcom Inc.'s non-current deferred income tax liabilities (in Other long-term liabilities) increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

Analyst Adjustments: Removal of Deferred Taxes

Broadcom Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Adjustment to Current Assets
Current assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden hidden
Current assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax assets, net hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Current Liabilities
Current liabilities (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Current liabilities (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Liabilities
Total liabilities (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Total liabilities (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Broadcom Inc. Stockholders’ Equity
Total Broadcom Inc. stockholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden
Total Broadcom Inc. stockholders’ equity (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Income (loss) Attributable To Ordinary Shares
Net income (loss) attributable to ordinary shares (as reported) hidden hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Net income (loss) attributable to ordinary shares (adjusted) hidden hidden hidden hidden hidden hidden

Adjusted Ratios: Removal of Deferred Taxes (Summary)

Broadcom Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Current Ratio
Reported current ratio hidden hidden hidden hidden hidden hidden
Adjusted current ratio hidden hidden hidden hidden hidden hidden
Net Profit Margin
Reported net profit margin hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted net profit margin hidden% hidden% hidden% hidden% hidden% hidden%
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted ROE hidden% hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted ROA hidden% hidden% hidden% hidden% hidden% hidden%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Broadcom Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Broadcom Inc.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Broadcom Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved 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.
Broadcom Inc.'s adjusted financial leverage declined from 2015 to 2016 but then slightly increased from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Broadcom Inc.'s adjusted ROE deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Broadcom Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Current assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Current liabilities (USD $ in millions) hidden hidden hidden hidden hidden hidden
Current ratio1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Adjusted current assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted current liabilities (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted current ratio2 hidden hidden hidden hidden hidden hidden

2017 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Broadcom Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Net income (loss) attributable to ordinary shares (USD $ in millions) hidden hidden hidden hidden hidden hidden
Net revenue (USD $ in millions) hidden hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted for Deferred Taxes
Adjusted net income (loss) attributable to ordinary shares (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to ordinary shares ÷ Net revenue
= 100 × hidden ÷ hidden = hidden%

2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to ordinary shares ÷ Net revenue
= 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. Broadcom Inc.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Net revenue (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

2017 Calculations

1 Total asset turnover = Net revenue ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Broadcom Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total Broadcom Inc. stockholders’ equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted total Broadcom Inc. stockholders’ equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

2017 Calculations

1 Financial leverage = Total assets ÷ Total Broadcom Inc. stockholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Broadcom Inc. 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.
Broadcom Inc.'s adjusted financial leverage declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Net income (loss) attributable to ordinary shares (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total Broadcom Inc. stockholders’ equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted for Deferred Taxes
Adjusted net income (loss) attributable to ordinary shares (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted total Broadcom Inc. stockholders’ equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROE = 100 × Net income (loss) attributable to ordinary shares ÷ Total Broadcom Inc. stockholders’ equity
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to ordinary shares ÷ Adjusted total Broadcom Inc. 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. Broadcom Inc.'s adjusted ROE deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Net income (loss) attributable to ordinary shares (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted for Deferred Taxes
Adjusted net income (loss) attributable to ordinary shares (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROA = 100 × Net income (loss) attributable to ordinary shares ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to ordinary shares ÷ Adjusted 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. Broadcom Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.