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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
- Deferred Tax Assets and Liabilities, Classification
- 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
Charter recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of Charter's assets and liabilities and expected benefits of utilizing loss carryforwards. Since substantially all Charter's operations are held through its partnership interest in Charter Holdings, the primary deferred tax component recorded in the consolidated balance sheet relates to the excess financial reporting outside basis, excluding amounts attributable to nondeductible goodwill, over Charter's tax basis in its investment in the partnership. Valuation allowances are established when management determines that it is more likely than not that some portion or the entire deferred tax asset will not be realized. The impact on deferred taxes of changes in tax rates and tax law, if any, applied to the years during which temporary differences are expected to be settled, are reflected in the consolidated financial statements in the period of enactment. In determining Charter's tax provision for financial reporting purposes, Charter establishes a reserve for uncertain tax positions unless such positions are determined to be "more likely than not" of being sustained upon examination, based on their technical merits. There is considerable judgment involved in making such a determination. Interest and penalties are recognized on uncertain income tax positions as part of the income tax provision.
Source: 10-K (filing date: 2018-02-02).
Income Tax Expense (Benefit)
Charter Communications Inc., income tax expense (benefit), continuing operations
USD $ in millions
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
| Item | Description | The company |
|---|---|---|
| Current income tax expense | Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. | Charter Communications Inc.'s current income tax expense increased from 2015 to 2016 but then slightly declined from 2016 to 2017. |
| Deferred income tax expense (benefit) | Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. | Charter Communications Inc.'s deferred income tax expense (benefit) declined from 2015 to 2016 and from 2016 to 2017. |
| Income tax expense (benefit) | Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. | Charter Communications Inc.'s income tax expense (benefit) declined from 2015 to 2016 and from 2016 to 2017. |
Effective Income Tax Rate (EITR)
Charter Communications Inc., effective income tax rate (EITR) reconciliation
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
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| Statutory federal income tax rate | |
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| Effective tax rate | |
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Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
| Item | Description | The company |
|---|---|---|
| Effective tax rate | Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. |
Components of Deferred Tax Assets and Liabilities
Charter Communications Inc., components of deferred tax assets and liabilities
USD $ in millions
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
| 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. | Charter Communications Inc.'s gross deferred tax assets declined from 2015 to 2016 and from 2016 to 2017. |
| Deferred tax assets | Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. | Charter Communications Inc.'s deferred tax assets increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level. |
| Net deferred 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. | Charter Communications Inc.'s net deferred tax assets (liabilities) declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Deferred Tax Assets and Liabilities, Classification
Charter Communications Inc., deferred tax assets and liabilities, classification
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Deferred tax liabilities | |
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Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
| Item | Description | The company |
|---|---|---|
| Deferred tax liabilities | Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. | Charter Communications Inc.'s deferred tax liabilities increased from 2015 to 2016 but then slightly declined from 2016 to 2017. |
Analyst Adjustments: Removal of Deferred Taxes
Charter Communications Inc., adjustments to financial data
USD $ in millions
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
Charter Communications Inc., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Charter Communications Inc., adjusted ratios
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Charter Communications Inc.'s adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated 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. |
Charter Communications 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. | Charter Communications Inc.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Charter Communications Inc.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017. |
Charter Communications Inc., Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Net profit margin = 100 × Net income (loss) attributable to Charter shareholders ÷ Revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Charter shareholders ÷ Revenues
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Charter Communications Inc.'s adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Financial leverage = Total assets ÷ Total Charter shareholders' equity (deficit)
= ÷ =
2 Adjusted financial leverage = Total assets ÷ Adjusted total Charter shareholders' equity (deficit)
= ÷ =
| 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. |
Charter Communications Inc.'s adjusted financial leverage declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
2017 Calculations
1 ROE = 100 × Net income (loss) attributable to Charter shareholders ÷ Total Charter shareholders' equity (deficit)
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to Charter shareholders ÷ Adjusted total Charter shareholders' equity (deficit)
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Charter Communications Inc.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-16), 10-K (filing date: 2016-02-10), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-21).
2017 Calculations
1 ROA = 100 × Net income (loss) attributable to Charter shareholders ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to Charter shareholders ÷ Total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Charter Communications Inc.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017. |
