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Analysis of Income Taxes

Advanced level

Accounting Policy on Income Taxes
Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Accounting Policy on Income Taxes

eBay accounts for income taxes using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. The measurement of current and deferred tax assets and liabilities is based on provisions of enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. If necessary, the measurement of deferred tax assets is reduced by the amount of any tax benefits that are not expected to be realized based on available evidence.

eBay reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. eBay recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

eBay accounted for the tax effects of The Tax Cuts and Jobs Act, enacted on December 22, 2017, on a provisional basis in the 2017 consolidated financial statements. eBay completed the accounting in the fourth quarter of 2018 within the one year measurement period from the enactment date.

Source: 10-K (filing date: 2019-01-30).

Income Tax Expense (Benefit)

eBay Inc., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended:	Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Federal
	State and local
	Foreign
	Current
	Federal
	State and local
	Foreign
	Deferred
	Provision (benefit) for income taxes

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

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

Effective Income Tax Rate (EITR)

eBay Inc., effective income tax rate (EITR) reconciliation

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Federal statutory tax rate
	Effective income tax rate

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

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.

Components of Deferred Tax Assets and Liabilities

eBay Inc., components of deferred tax assets and liabilities

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Net operating loss, capital loss and credits
	Accruals and allowances
	Stock-based compensation
	Amortizable tax basis in intangibles
	Net unrealized losses
	Net deferred tax assets
	Valuation allowance
	Deferred tax assets
	Unremitted foreign earnings
	Acquisition-related intangibles
	Depreciation and amortization
	Net unrealized gain
	Available-for-sale securities
	Other
	Deferred tax liabilities
	Net deferred tax assets and liabilities

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

Item	Description	The company
Net deferred tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	eBay Inc.’s net deferred tax assets increased from 2016 to 2017 but then slightly decreased from 2017 to 2018 not reaching 2016 level.
Deferred tax assets	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	eBay Inc.’s deferred tax assets increased from 2016 to 2017 but then slightly decreased from 2017 to 2018 not reaching 2016 level.
Net deferred tax assets and liabilities	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	eBay Inc.’s net deferred tax assets and liabilities decreased from 2016 to 2017 but then slightly increased from 2017 to 2018.

Adjustments to Financial Statements: Removal of Deferred Taxes

eBay Inc., adjustments to financial statements

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Stockholders’ Equity
	Stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Stockholders’ equity (adjusted)
	Adjustment to Net Income (loss)
	Net income (loss) (as reported)
	Add: Deferred income tax expense (benefit)
	Net income (loss) (adjusted)

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

eBay Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

eBay Inc., adjusted financial ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	eBay Inc.’s adjusted net profit margin ratio 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.	eBay Inc.’s adjusted total asset turnover ratio 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.	eBay Inc.’s adjusted financial leverage ratio 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.	eBay Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	eBay Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

eBay Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss)
	Net revenues
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss)
	Net revenues
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

2018 Calculations

¹ Net profit margin = 100 × Net income (loss) ÷ Net revenues
= 100 × ÷ =

² Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Net revenues
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	eBay Inc.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Adjusted Total Asset Turnover

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net revenues
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Net revenues
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

2018 Calculations

¹ Total asset turnover = Net revenues ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Net revenues ÷ Adjusted total assets
= ÷ =

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	eBay Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Financial Leverage

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Stockholders’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted stockholders’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

2018 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= ÷ =

Solvency 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.	eBay Inc.’s adjusted financial leverage ratio increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss)
	Stockholders’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss)
	Adjusted stockholders’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

2018 Calculations

¹ ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × ÷ =

² Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted stockholders’ equity
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	eBay Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Assets (ROA)

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss)
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss)
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2019-01-30), 10-K (filing date: 2018-02-05), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-06).

2018 Calculations

¹ ROA = 100 × Net income (loss) ÷ Total assets
= 100 × ÷ =

² Adjusted ROA = 100 × Adjusted net income (loss) ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	eBay Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

	eBay Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

eBay Inc. (NASDAQ:EBAY)

Analysis of Income Taxes

Accounting Policy on Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Adjustments to Financial Statements: Removal of Deferred Taxes

eBay Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

eBay Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)