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Microsoft Excel LibreOffice Calc


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Costco accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts that are more likely than not expected to be realized.

The timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions requires significant judgment. The benefits of uncertain tax positions are recorded in Costco’s consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge from tax authorities. When facts and circumstances change, Costco reassesses these probabilities and records any changes as appropriate.

Source: 10-K (filing date: 2018-10-26).


Income Tax Expense (Benefit)

Costco Wholesale Corp., income tax expense (benefit), continuing operations

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 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: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Costco Wholesale Corp.’s current increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Costco Wholesale Corp.’s deferred declined 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. Costco Wholesale Corp.’s provision for income taxes increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

Effective Income Tax Rate (EITR)

Costco Wholesale Corp., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
Statutory tax rate hidden hidden hidden hidden hidden hidden
State taxes, net hidden hidden hidden hidden hidden hidden
Foreign taxes, net hidden hidden hidden hidden hidden hidden
Employee stock ownership plan (ESOP) hidden hidden hidden hidden hidden hidden
2017 Tax Act hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Effective tax rate hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

Item Description The company
Effective tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Costco Wholesale Corp.’s effective tax rate declined from 2016 to 2017 and from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

Costco Wholesale Corp., components of deferred tax assets and liabilities

USD $ in millions

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
Equity compensation hidden hidden hidden hidden hidden hidden
Deferred income/membership fees hidden hidden hidden hidden hidden hidden
Accrued liabilities and reserves hidden hidden hidden hidden hidden hidden
Property and equipment hidden hidden hidden hidden hidden hidden
Merchandise inventories hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

Item Description The company
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. Costco Wholesale Corp.’s net deferred tax assets (liabilities) increased from 2016 to 2017 and from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

Costco Wholesale Corp., deferred tax assets and liabilities, classification

USD $ in millions

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

Item Description The company
Non-current deferred income tax assets (included in Other 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. Costco Wholesale Corp.’s non-current deferred income tax assets (included in Other assets) increased from 2016 to 2017 and from 2017 to 2018.
Non-current deferred income tax liabilities (included in Other liabilities) Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Costco Wholesale Corp.’s non-current deferred income tax liabilities (included in Other liabilities) increased from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Deferred Taxes

Costco Wholesale Corp., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 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 Total Liabilities
Total liabilities (as reported) 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 Costco Stockholders’ Equity
Total Costco stockholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden
Total Costco stockholders’ equity (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Income Attributable To Costco
Net income attributable to Costco (as reported) hidden hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Net income attributable to Costco (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).


Costco Wholesale Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Costco Wholesale Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 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: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Costco Wholesale Corp.’s adjusted current ratio improved 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. Costco Wholesale Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Costco Wholesale Corp.’s adjusted total asset turnover deteriorated 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.
Costco Wholesale Corp.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Costco Wholesale Corp.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Costco Wholesale Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Costco Wholesale Corp., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 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
Current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Adjusted current ratio2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

2018 Calculations

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

2 Adjusted current ratio = Adjusted current assets ÷ 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. Costco Wholesale Corp.’s adjusted current ratio improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to Costco hidden hidden hidden hidden hidden hidden
Net sales 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 attributable to Costco hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

2018 Calculations

1 Net profit margin = 100 × Net income attributable to Costco ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Costco ÷ Net sales
= 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. Costco Wholesale Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net sales 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)
Net sales 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: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

2018 Calculations

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

2 Adjusted total asset turnover = Net sales ÷ 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. Costco Wholesale Corp.’s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Total Costco stockholders’ 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 Costco stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Costco stockholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Costco 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.
Costco Wholesale Corp.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to Costco hidden hidden hidden hidden hidden hidden
Total Costco stockholders’ 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 attributable to Costco hidden hidden hidden hidden hidden hidden
Adjusted total Costco stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

2018 Calculations

1 ROE = 100 × Net income attributable to Costco ÷ Total Costco stockholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income attributable to Costco ÷ Adjusted total Costco 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. Costco Wholesale Corp.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to Costco 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 attributable to Costco 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: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

2018 Calculations

1 ROA = 100 × Net income attributable to Costco ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income attributable to Costco ÷ 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. Costco Wholesale Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.