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Qualcomm Inc. (QCOM)
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 Current Ratio
- Adjusted Net Profit Margin
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Income Tax Accounting Policy
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Tax law and rate changes are reflected in income in the period such changes are enacted. Qualcomm records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Qualcomm includes interest and penalties related to income taxes, including unrecognized tax benefits, within income tax expense. Qualcomm classifies all deferred tax assets and liabilities as noncurrent in the consolidated balance sheets.
Qualcomm’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of Qualcomm’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. Qualcomm recognizes liabilities for uncertain tax positions based on a two-step process. 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. While Qualcomm believes Qualcomm has appropriate support for the positions taken on the tax returns, Qualcomm regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of the provision for income taxes. Qualcomm continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.
Beginning in fiscal 2018, Qualcomm recognizes excess tax benefits and shortfall tax detriments associated with share-based awards in the consolidated statements of operations, as a component of income tax expense, when realized. Prior to fiscal 2018, Qualcomm recognized such excess tax benefits and shortfall tax detriments directly to stockholders’ equity when realized since, in the case of shortfall tax detriments, Qualcomm had a sufficient APIC windfall pool. An excess tax benefit occurs when the actual tax benefit realized by Qualcomm upon an employee’s disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that Qualcomm had recorded. A shortfall tax detriment occurs when the actual tax benefit realized by Qualcomm upon an employee’s disposition of a share-based award is less than the deferred tax asset, if any, associated with the award that Qualcomm has recorded.
Source: 10-K (filing date: 2018-11-07).
Income Tax Expense (Benefit)
Qualcomm Inc., income tax expense (benefit), continuing operations
US$ in millions
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
| Item | Description | The company |
|---|---|---|
| Current provision | Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. | Qualcomm Inc.’s current provision declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level. |
| Deferred provision (benefit) | Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. | Qualcomm Inc.’s deferred provision (benefit) declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level. |
| Income tax provision | Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. | Qualcomm Inc.’s income tax provision declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level. |
Effective Income Tax Rate (EITR)
Qualcomm Inc., effective income tax rate (EITR) reconciliation
| Sep 30, 2018 | Sep 24, 2017 | Sep 25, 2016 | Sep 27, 2015 | Sep 28, 2014 | Sep 29, 2013 | ||
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| Federal statutory tax rate | |
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| Effective income tax rate | |
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Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
| 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. | Qualcomm Inc.’s effective income tax rate increased from 2016 to 2017 and from 2017 to 2018. |
Components of Deferred Tax Assets and Liabilities
Qualcomm Inc., components of deferred tax assets and liabilities
US$ in millions
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
| 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. | Qualcomm Inc.’s gross deferred tax assets increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Net deferred tax assets | Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. | Qualcomm Inc.’s net deferred tax assets increased from 2016 to 2017 but then declined significantly 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. | Qualcomm Inc.’s net deferred tax assets (liabilities) increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Deferred Tax Assets and Liabilities, Classification
Qualcomm Inc., deferred tax assets and liabilities, classification
US$ in millions
| Sep 30, 2018 | Sep 24, 2017 | Sep 25, 2016 | Sep 27, 2015 | Sep 28, 2014 | Sep 29, 2013 | ||
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| Current deferred tax assets | |
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| Non-current deferred tax assets | |
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| Current deferred tax liabilities (included in Other current liabilities) | |
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| Non-current deferred tax liabilities (included in Other liabilities) | |
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Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
| Item | Description | The company |
|---|---|---|
| Non-current deferred tax 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. | Qualcomm Inc.’s non-current deferred tax assets increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Non-current deferred 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. | Qualcomm Inc.’s non-current deferred tax liabilities (included in Other liabilities) increased from 2016 to 2017 and from 2017 to 2018. |
Analyst Adjustments: Removal of Deferred Taxes
Qualcomm Inc., adjustments to financial data
US$ in millions
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
Qualcomm Inc., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Qualcomm Inc., adjusted ratios
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. | Qualcomm Inc.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Qualcomm 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. | Qualcomm 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. |
Qualcomm 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. | Qualcomm 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. | Qualcomm Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018. |
Qualcomm Inc., Ratios: Reported vs. Adjusted
Adjusted Current Ratio
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
2018 Calculations
1 Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. | Qualcomm Inc.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
2018 Calculations
1 Net profit margin = 100 × Net income (loss) attributable to Qualcomm ÷ Revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Qualcomm ÷ Revenues
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Qualcomm Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 and from 2017 to 2018. |
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
2018 Calculations
1 Total asset turnover = Revenues ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Qualcomm Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
2018 Calculations
1 Financial leverage = Total assets ÷ Total Qualcomm stockholders’ equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Qualcomm stockholders’ equity
= ÷ =
| 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. |
Qualcomm Inc.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
2018 Calculations
1 ROE = 100 × Net income (loss) attributable to Qualcomm ÷ Total Qualcomm stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to Qualcomm ÷ Adjusted total Qualcomm stockholders’ equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | Qualcomm Inc.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
2018 Calculations
1 ROA = 100 × Net income (loss) attributable to Qualcomm ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to Qualcomm ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Qualcomm Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018. |