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Microsoft Excel LibreOffice Calc

Broadcom Inc. (AVGO)


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: 10-K (filing date: 2018-12-21).


Income Tax Expense (Benefit)

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

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
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 (benefit from) income taxes hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

Item Description The company
Current tax expense Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Broadcom Inc.’s current tax expense increased from 2016 to 2017 and from 2017 to 2018.
Deferred tax expense (benefit) Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Broadcom Inc.’s deferred tax expense (benefit) declined from 2016 to 2017 and from 2017 to 2018.
Provision for (benefit from) income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Broadcom Inc.’s provision for (benefit from) income taxes declined from 2016 to 2017 and from 2017 to 2018.

Effective Income Tax Rate (EITR)

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

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
Statutory tax rate hidden hidden hidden hidden hidden hidden
2017 Tax reform hidden hidden hidden hidden hidden hidden
Withholding tax hidden hidden hidden hidden hidden hidden
Foreign income taxed at different rates hidden hidden hidden hidden hidden hidden
Excess tax benefits from stock-based compensation hidden hidden hidden hidden hidden hidden
Research and development credit hidden hidden hidden hidden hidden hidden
Deemed inclusion of foreign earnings 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

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

Item Description The company
Actual tax rate on income (loss) before income taxes Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Broadcom Inc.’s actual tax rate on income (loss) before income taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

Broadcom Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
Depreciation and amortization hidden hidden hidden hidden hidden hidden
Employee benefits hidden hidden hidden hidden hidden hidden
Employee stock 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

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

Item Description The company
Gross deferred income tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Broadcom Inc.’s gross deferred income tax assets increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Deferred income tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Broadcom Inc.’s deferred income tax assets increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Net deferred income tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Broadcom Inc.’s net deferred income tax assets (liabilities) declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Deferred Tax Assets and Liabilities, Classification

Broadcom Inc., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

Item Description The company
Non-current deferred income tax assets (in Other long-term assets) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Broadcom Inc.’s non-current deferred income tax assets (in Other long-term assets) declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.
Non-current deferred income tax liabilities (in Other long-term liabilities) Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Broadcom Inc.’s non-current deferred income tax liabilities (in Other long-term liabilities) declined from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Deferred Taxes

Broadcom Inc., adjustments to financial data

US$ in millions

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
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 Common Stock
Net income (loss) attributable to common stock (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 common stock (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).


Broadcom Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Broadcom Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
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

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

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 improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 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 improved from 2016 to 2017 and from 2017 to 2018.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Broadcom Inc.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
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 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. Broadcom Inc.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Broadcom Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.

Broadcom Inc., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
As Reported
Selected Financial Data (US$ in millions)
Current assets hidden hidden hidden hidden hidden hidden
Current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Current ratio1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets hidden hidden hidden hidden hidden hidden
Adjusted current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Adjusted current ratio2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

2018 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 improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to common stock hidden hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to common stock hidden hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

2018 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to common stock ÷ Net revenue
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to common stock ÷ 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 improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
As Reported
Selected Financial Data (US$ in millions)
Net revenue hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net revenue hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

2018 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 improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
As Reported
Selected Financial Data (US$ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Total Broadcom Inc. stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted total Broadcom Inc. stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

2018 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 increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to common stock hidden hidden hidden hidden hidden hidden
Total Broadcom Inc. stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to common stock hidden hidden hidden hidden hidden hidden
Adjusted total Broadcom Inc. stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

2018 Calculations

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

2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to common stock ÷ 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 improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to common stock hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to common stock hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20).

2018 Calculations

1 ROA = 100 × Net income (loss) attributable to common stock ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to common stock ÷ 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 improved from 2016 to 2017 and from 2017 to 2018.