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Microsoft Excel LibreOffice Calc

Cisco Systems Inc. (CSCO)


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

Cisco accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Cisco classifies the liability for unrecognized tax benefits as current to the extent that Cisco anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

Source: 10-K (filing date: 2018-09-06).


Income Tax Expense (Benefit)

Cisco Systems Inc., income tax expense (benefit), continuing operations

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
Federal hidden hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Current hidden hidden hidden hidden hidden hidden
Federal hidden hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Deferred hidden hidden hidden hidden hidden hidden
Provision for income taxes hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

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

Effective Income Tax Rate (EITR)

Cisco Systems Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
Federal statutory tax rate hidden hidden hidden hidden hidden hidden
State taxes, net of federal tax benefit hidden hidden hidden hidden hidden hidden
Foreign income at other than U.S. rates hidden hidden hidden hidden hidden hidden
Tax credits hidden hidden hidden hidden hidden hidden
Domestic manufacturing deduction hidden hidden hidden hidden hidden hidden
Stock-based compensation hidden hidden hidden hidden hidden hidden
Tax audit settlement hidden hidden hidden hidden hidden hidden
Impact of the Tax Act hidden hidden hidden hidden hidden hidden
Other, net hidden hidden hidden hidden hidden hidden
Effective income tax rate hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

Item Description The company
Effective income tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Cisco Systems Inc.’s effective income tax rate increased from 2016 to 2017 and from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

Cisco Systems Inc., components of deferred tax assets and liabilities

USD $ in millions

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
Allowance for doubtful accounts and returns hidden hidden hidden hidden hidden hidden
Sales-type and direct-financing leases hidden hidden hidden hidden hidden hidden
Inventory write-downs and capitalization hidden hidden hidden hidden hidden hidden
Investment provisions hidden hidden hidden hidden hidden hidden
IPR&D, goodwill, and purchased intangible assets hidden hidden hidden hidden hidden hidden
Deferred revenue hidden hidden hidden hidden hidden hidden
Credits and net operating loss carryforwards hidden hidden hidden hidden hidden hidden
Share-based compensation expense hidden hidden hidden hidden hidden hidden
Accrued compensation hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Gross deferred tax assets hidden hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden hidden
Deferred tax assets hidden hidden hidden hidden hidden hidden
Purchased intangible assets hidden hidden hidden hidden hidden hidden
Depreciation hidden hidden hidden hidden hidden hidden
Unrealized gains on investments hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Deferred tax liabilities hidden hidden hidden hidden hidden hidden
Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

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. Cisco Systems Inc.’s gross deferred tax assets increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Cisco Systems Inc.’s deferred tax assets declined from 2016 to 2017 and from 2017 to 2018.
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. Cisco Systems Inc.’s net deferred tax assets (liabilities) declined from 2016 to 2017 and from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

Cisco Systems Inc., deferred tax assets and liabilities, classification

USD $ in millions

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

Item Description The company
Deferred tax assets, noncurrent 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. Cisco Systems Inc.’s deferred tax assets, noncurrent declined from 2016 to 2017 and from 2017 to 2018.
Deferred tax liabilities, noncurrent Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Cisco Systems Inc.’s deferred tax liabilities, noncurrent declined from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Deferred Taxes

Cisco Systems Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 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 Cisco Shareholders’ Equity
Total Cisco shareholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden
Total Cisco shareholders’ equity (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Income
Net income (as reported) hidden hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Net income (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).


Cisco Systems Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Cisco Systems Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 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: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Cisco Systems Inc.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Cisco Systems Inc.’s adjusted net profit margin deteriorated 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. Cisco Systems Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 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.
Cisco Systems 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. Cisco Systems Inc.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Cisco Systems Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

Cisco Systems Inc., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
As Reported
Selected Financial Data (USD $ 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 (USD $ 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: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

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. Cisco Systems Inc.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden hidden
Revenue hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden hidden
Revenue hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations

1 Net profit margin = 100 × Net income ÷ Revenue
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income ÷ 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. Cisco Systems Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
As Reported
Selected Financial Data (USD $ in millions)
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 (USD $ in millions)
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: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = 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. Cisco Systems Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Total Cisco shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted total Cisco shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Cisco shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Cisco 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.
Cisco Systems Inc.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden hidden
Total Cisco shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden hidden
Adjusted total Cisco shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations

1 ROE = 100 × Net income ÷ Total Cisco shareholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted total Cisco 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. Cisco Systems Inc.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jul 28, 2018 Jul 29, 2017 Jul 30, 2016 Jul 25, 2015 Jul 26, 2014 Jul 27, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income 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 (USD $ in millions)
Adjusted net income 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: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income ÷ 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. Cisco Systems Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.