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Microsoft Excel LibreOffice Calc

NVIDIA Corp. (NVDA)


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

NVIDIA recognizes federal, state and foreign current tax liabilities or assets based on the estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. NVIDIA recognizes federal, state and foreign deferred tax assets or liabilities, as appropriate, for the estimate of future tax effects attributable to temporary differences and carryforwards; and NVIDIA records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized.

NVIDIA’s calculation of deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. The estimates of deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the United States, or foreign jurisdictions where NVIDIA operates, or changes in other facts or circumstances. In addition, NVIDIA recognizes liabilities for potential United States and foreign income tax contingencies based on the estimate of whether, and the extent to which, additional taxes may be due. If NVIDIA determines that payment of these amounts is unnecessary or if the recorded tax liability is less than the current assessment, NVIDIA may be required to recognize an income tax benefit or additional income tax expense in the financial statements accordingly.

As of January 27, 2019, NVIDIA had a valuation allowance of $562 million related to state and certain foreign deferred tax assets that management determined are not likely to be realized due to projections of future taxable income and potential utilization limitations of tax attributes acquired as a result of stock ownership changes. To the extent realization of the deferred tax assets becomes more-likely-than-not, NVIDIA would recognize such deferred tax asset as an income tax benefit during the period.

NVIDIA recognizes the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. NVIDIA’s policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.

The Tax Cuts and Jobs Act, or TCJA, which was enacted in December 2017, significantly changes U.S. tax law, including a reduction of the U.S. federal corporate income tax rate from 35% to 21%, a requirement for companies to pay a one-time transition tax on the earnings of certain foreign subsidiaries that were previously tax deferred, and the creation of new taxes (global intangible low-taxed income, or GILTI) on certain foreign-source earnings. As a fiscal year-end taxpayer, certain provisions of the TCJA began to impact NVIDIA in the fourth quarter of fiscal year 2018, while other provisions impacted NVIDIA beginning in fiscal year 2019. The Securities and Exchange Commission, or the SEC, had provided guidance in Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed companies to record provisional amounts during a measurement period up to one year from the enactment date. As of January 27, 2019, NVIDIA completed the accounting for all of the enactment-date income tax effects of the TCJA and elected to account for GILTI in deferred taxes.

Source: 10-K (filing date: 2019-02-21).


Income Tax Expense (Benefit)

NVIDIA Corp., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
Federal hidden hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Current income taxes hidden hidden hidden hidden hidden hidden
Federal hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Deferred taxes hidden hidden hidden hidden hidden hidden
Charge in lieu of taxes attributable to employer stock option plans hidden hidden hidden hidden hidden hidden
Income tax expense (benefit) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

Item Description The company
Current income taxes Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. NVIDIA Corp.’s current income taxes increased from 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level.
Deferred taxes Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. NVIDIA Corp.’s deferred taxes declined from 2017 to 2018 but then slightly increased from 2018 to 2019.
Income tax expense (benefit) Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. NVIDIA Corp.’s income tax expense (benefit) declined from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

NVIDIA Corp., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
Federal statutory income tax rate hidden hidden hidden hidden hidden hidden
Effective income tax rate, before Tax Cuts and Jobs Act of 2017 hidden hidden hidden hidden hidden hidden
Effective income tax rate hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

Item Description The company
Effective income tax rate, before Tax Cuts and Jobs Act of 2017 Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. NVIDIA Corp.’s effective income tax rate, before Tax Cuts and Jobs Act of 2017 declined from 2017 to 2018 and from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

NVIDIA Corp., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
Net operating loss carryforwards hidden hidden hidden hidden hidden hidden
Accruals and reserves, not currently deductible for tax purposes hidden hidden hidden hidden hidden hidden
Property, equipment and intangible assets hidden hidden hidden hidden hidden hidden
Research and other tax credit carryforwards hidden hidden hidden hidden hidden hidden
Stock-based compensation hidden hidden hidden hidden hidden hidden
GILTI deferred tax assets hidden hidden hidden hidden hidden hidden
Convertible debt 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
Acquired intangibles hidden hidden hidden hidden hidden hidden
Unremitted earnings of foreign subsidiaries hidden hidden hidden hidden hidden hidden
Gross deferred tax liabilities hidden hidden hidden hidden hidden hidden
Net deferred tax asset (liability) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

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. NVIDIA Corp.’s gross deferred tax assets declined from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. NVIDIA Corp.’s deferred tax assets declined from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.
Net deferred tax asset (liability) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. NVIDIA Corp.’s net deferred tax asset (liability) increased from 2017 to 2018 and from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

NVIDIA Corp., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

Item Description The company
Long-term deferred 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. NVIDIA Corp.’s long-term deferred tax assets (included in Other assets) increased from 2017 to 2018 and from 2018 to 2019.
Long-term deferred tax liabilities (included 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. NVIDIA Corp.’s long-term deferred tax liabilities (included in Other long-term liabilities) declined from 2017 to 2018 but then slightly increased from 2018 to 2019.

Analyst Adjustments: Removal of Deferred Taxes

NVIDIA Corp., adjustments to financial data

US$ in millions

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
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 Shareholders’ Equity
Shareholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden
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: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).


NVIDIA Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

NVIDIA Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
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: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. NVIDIA Corp.’s adjusted current ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. NVIDIA Corp.’s adjusted net profit margin improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. NVIDIA Corp.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.
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.
NVIDIA Corp.’s adjusted financial leverage declined from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. NVIDIA Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. NVIDIA Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

NVIDIA Corp., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
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
Current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Adjusted current ratio2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 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. NVIDIA Corp.’s adjusted current ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ 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 (US$ 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: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 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. NVIDIA Corp.’s adjusted net profit margin improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ 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 (US$ 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: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 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. NVIDIA Corp.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Shareholders’ 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 shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted 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.
NVIDIA Corp.’s adjusted financial leverage declined from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Shareholders’ 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 hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 Calculations

1 ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted 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. NVIDIA Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ 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 (US$ 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: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 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. NVIDIA Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.