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Microsoft Excel LibreOffice Calc


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

The provision for income taxes is determined using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. 3M records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exists. As of December 31, 2017 and 2016, 3M had valuation allowances of $81 million and $47 million on its deferred tax assets, respectively. The increase in valuation allowance at December 31, 2017 relates to certain U.S. and international jurisdictions with taxable loss or tax credit carryforwards that are expected to expire prior to utilization. 3M recognizes and measures its uncertain tax positions based on the rules under ASC 740, Income Taxes.

Source: 10-K (filing date: 2018-02-08).


Income Tax Expense (Benefit)

3M Co., income tax expense (benefit), continuing operations

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Federal hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden
International hidden hidden hidden hidden hidden
Currently payable hidden hidden hidden hidden hidden
Federal hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden
International hidden hidden hidden hidden hidden
Deferred hidden hidden hidden hidden hidden
Tax Cuts and Jobs Act (TCJA) non-current transition tax provision hidden hidden hidden hidden hidden
Provision for income taxes hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

Item Description The company
Currently payable Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. 3M Co.'s currently payable declined from 2015 to 2016 and from 2016 to 2017.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. 3M Co.'s deferred increased from 2015 to 2016 and from 2016 to 2017.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. 3M Co.'s provision for income taxes increased from 2015 to 2016 and from 2016 to 2017.

Effective Income Tax Rate (EITR)

3M Co., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Statutory U.S. tax rate hidden hidden hidden hidden hidden
State income taxes, net of federal benefit hidden hidden hidden hidden hidden
International income taxes, net hidden hidden hidden hidden hidden
U.S. TCJA, net impacts hidden hidden hidden hidden hidden
U.S. research and development credit hidden hidden hidden hidden hidden
Reserves for tax contingencies hidden hidden hidden hidden hidden
Domestic Manufacturer’s deduction hidden hidden hidden hidden hidden
Employee share-based payments hidden hidden hidden hidden hidden
All other, net hidden hidden hidden hidden hidden
Effective worldwide tax rate hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

Item Description The company
Effective worldwide tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. 3M Co.'s effective worldwide tax rate declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Components of Deferred Tax Assets and Liabilities

3M Co., components of deferred tax assets and liabilities

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Employee benefit costs hidden hidden hidden hidden hidden
Product and other claims hidden hidden hidden hidden hidden
Miscellaneous accruals hidden hidden hidden hidden hidden
Accruals not currently deductible hidden hidden hidden hidden hidden
Pension costs hidden hidden hidden hidden hidden
Stock-based compensation hidden hidden hidden hidden hidden
Net operating/capital loss carryforwards hidden hidden hidden hidden hidden
Foreign tax credits hidden hidden hidden hidden hidden
Currency translation hidden hidden hidden hidden hidden
Inventory hidden hidden hidden hidden hidden
Gross deferred tax assets hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden
Deferred tax assets hidden hidden hidden hidden hidden
Product and other insurance receivables hidden hidden hidden hidden hidden
Accelerated depreciation hidden hidden hidden hidden hidden
Intangible amortization hidden hidden hidden hidden hidden
Currency translation hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden
Deferred tax liabilities hidden hidden hidden hidden hidden
Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

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. 3M Co.'s gross deferred tax assets increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. 3M Co.'s deferred tax assets increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
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. 3M Co.'s net deferred tax assets (liabilities) increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

Deferred Tax Assets and Liabilities, Classification

3M Co., deferred tax assets and liabilities, classification

USD $ in millions

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

Item Description The company
Noncurrent 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. 3M Co.'s noncurrent deferred tax assets (included in Other assets) declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Noncurrent 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. 3M Co.'s noncurrent deferred tax liabilities (included in Other liabilities) declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

Analyst Adjustments: Removal of Deferred Taxes

3M Co., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Current Assets
Current assets (as reported) hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden
Current assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax assets, net hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Current Liabilities
Current liabilities (as reported) hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden
Current liabilities (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Liabilities
Total liabilities (as reported) hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax liabilities, net hidden hidden hidden hidden hidden
Total liabilities (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total 3M Company Shareholders' Equity
Total 3M Company shareholders' equity (as reported) hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden
Total 3M Company shareholders' equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income Attributable To 3M
Net income attributable to 3M (as reported) hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Net income attributable to 3M (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).


3M Co., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

3M Co., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current Ratio
Reported current ratio hidden hidden hidden hidden hidden
Adjusted current ratio hidden hidden hidden hidden hidden
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. 3M Co.'s adjusted current ratio improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. 3M Co.'s adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. 3M Co.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
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.
3M Co.'s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. 3M Co.'s adjusted ROE improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. 3M Co.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

3M Co., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Current assets hidden hidden hidden hidden hidden
Current liabilities hidden hidden hidden hidden hidden
Ratio
Current ratio1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted current assets hidden hidden hidden hidden hidden
Adjusted current liabilities hidden hidden hidden hidden hidden
Ratio
Adjusted current ratio2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 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. 3M Co.'s adjusted current ratio improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to 3M hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to 3M hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 Calculations

1 Net profit margin = 100 × Net income attributable to 3M ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income attributable to 3M ÷ 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. 3M Co.'s adjusted net profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 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. 3M Co.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden
Total 3M Company shareholders' equity hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted total assets hidden hidden hidden hidden hidden
Adjusted total 3M Company shareholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 Calculations

1 Financial leverage = Total assets ÷ Total 3M Company shareholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total 3M Company 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.
3M Co.'s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to 3M hidden hidden hidden hidden hidden
Total 3M Company shareholders' equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to 3M hidden hidden hidden hidden hidden
Adjusted total 3M Company shareholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 Calculations

1 ROE = 100 × Net income attributable to 3M ÷ Total 3M Company shareholders' equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income attributable to 3M ÷ Adjusted total 3M Company 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. 3M Co.'s adjusted ROE improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to 3M hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to 3M hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 Calculations

1 ROA = 100 × Net income attributable to 3M ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income attributable to 3M ÷ 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. 3M Co.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.