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Microsoft Excel LibreOffice Calc


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities at the applicable tax rates. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Allergan evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include Allergan’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in Allergan’s effective tax rate on future earnings.

Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first financial reporting period in which that threshold is no longer met. Allergan recognizes potential accrued interest and penalties related to unrecognized tax benefits within the consolidated statements of operations as income tax expense.

The income tax effects of the TCJA have been initially accounted for on a provisional basis pursuant to the guidance in Staff Accouting Bulletin ("SAB") 118. Reasonable estimates for all material tax effects of the TCJA (other than amounts related to accounting policy elections) have been provided and adjustments to provisional amounts will be made in subsequent reporting periods as information becomes available to complete provisional computations. The provisional impact of the TCJA for the Federal tax rate change and the resulting deferred tax liability for unremitted earnings will be completed in subsequent measurement periods when the required computations for the 2017 tax year and the related tax returns for the relevant entities have been completed. The final amount for the toll charge is dependent on amounts that cannot be determined until the 2018 financial results of certain non-US subsidiaries are completed. In addition, the IRS continues to issue interpretive guidance on the computation of the tax on deferred foreign earnings and therefore the computations cannot be finalized until all relevant IRS guidance has been promulgated and its impact assessed.

The TCJA introduced an additional U.S. tax on certain non-U.S. subsidiaries’ earnings which are considered to be Global Intangible Low Taxed Income (referred to as "GILTI"). Under this provision, the amount of GILTI included by a U.S. shareholder will be taxed at a rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits.

Due to the complexity of the new GILTI tax rules, Allergan is continuing to evaluate this provision of the TCJA and the application of ASC 740 and is considering if deferred tax amounts should be recorded for this provision. The accounting policies depend, in part, on analyzing the global income to determine whether Allergan expects material tax liabilities resulting from the application of this provision, and, if so, whether and when to record related current and deferred income taxes and whether such amounts can be reasonably estimated. Anticipated further guidance from the IRS will also clarify the manner in which the GILTI tax is computed. For these reasons, Allergan has not recorded a deferred tax expense or benefit relating to potential GILTI tax in the 2017 consolidated financial statements and has not made a policy election regarding whether to record deferred taxes on GILTI or account for the GILTI entirely as a period cost.

Source: 10-K (filing date: 2018-02-16).


Income Tax Expense (Benefit)

Allergan PLC, income tax expense (benefit), continuing operations

USD $ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
U.S. federal hidden hidden hidden hidden hidden
U.S. state hidden hidden hidden hidden hidden
Non-U.S. hidden hidden hidden hidden hidden
Current provision hidden hidden hidden hidden hidden
U.S. federal hidden hidden hidden hidden hidden
U.S. state hidden hidden hidden hidden hidden
Non-U.S. hidden hidden hidden hidden hidden
Deferred benefit hidden hidden hidden hidden hidden
Provision (benefit) for income taxes hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

Item Description The company
Current provision Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Allergan PLC’s current provision declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Deferred benefit Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Allergan PLC’s deferred benefit declined from 2015 to 2016 and from 2016 to 2017.
Provision (benefit) for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Allergan PLC’s provision (benefit) for income taxes declined from 2015 to 2016 and from 2016 to 2017.

Effective Income Tax Rate (EITR)

Allergan PLC, 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 tax rate hidden hidden hidden hidden hidden
Effective income tax rate hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

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. Allergan PLC’s effective income tax rate increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

Components of Deferred Tax Assets and Liabilities

Allergan PLC, components of deferred tax assets and liabilities

USD $ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Benefits from net operating and capital losses and tax credit carryfowards hidden hidden hidden hidden hidden
Inventories, receivables and accruals hidden hidden hidden hidden hidden
Basis differences in investments hidden hidden hidden hidden hidden
Outside basis differences hidden hidden hidden hidden hidden
Share-based and other compensation hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden
Deferred tax asset, gross hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden
Deferred tax asset, net hidden hidden hidden hidden hidden
Property, equipment and intangible assets hidden hidden hidden hidden hidden
Outside basis differences hidden hidden hidden hidden hidden
Investment in subsidiaries hidden hidden hidden hidden hidden
Basis difference in debt hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden
Deferred tax liabilities hidden hidden hidden hidden hidden
Deferred taxes hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

Item Description The company
Deferred tax asset, gross Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Allergan PLC’s deferred tax asset, gross declined from 2015 to 2016 but then slightly increased from 2016 to 2017.
Deferred tax asset, net Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Allergan PLC’s deferred tax asset, net declined from 2015 to 2016 but then slightly increased from 2016 to 2017.
Deferred taxes Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Allergan PLC’s deferred taxes declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Deferred Tax Assets and Liabilities, Classification

Allergan PLC, deferred tax assets and liabilities, classification

USD $ in thousands

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

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. Allergan PLC’s non-current deferred tax assets increased from 2015 to 2016 and from 2016 to 2017.
Non-current deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Allergan PLC’s non-current deferred tax liabilities increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Analyst Adjustments: Removal of Deferred Taxes

Allergan PLC, adjustments to financial data

USD $ in thousands

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 Shareholders’ Equity
Shareholders’ equity (as reported) hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden
Shareholders’ equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income (loss) Attributable To Shareholders
Net income (loss) attributable to shareholders (as reported) hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Net income (loss) attributable to shareholders (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).


Allergan PLC, Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Allergan PLC, 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: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

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

Allergan PLC, 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 thousands)
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 thousands)
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: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

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. Allergan PLC’s adjusted current ratio improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level.

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 thousands)
Net income (loss) attributable to shareholders hidden hidden hidden hidden hidden
Net revenues hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted net income (loss) attributable to shareholders hidden hidden hidden hidden hidden
Net revenues hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

2017 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to shareholders ÷ Net revenues
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to shareholders ÷ Net revenues
= 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. Allergan PLC’s adjusted net profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

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 thousands)
Net revenues 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 thousands)
Net revenues 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: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

2017 Calculations

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

2 Adjusted total asset turnover = Net revenues ÷ 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. Allergan PLC’s adjusted total asset turnover improved 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 thousands)
Total assets hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted total assets hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

2017 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.
Allergan PLC’s adjusted financial leverage declined from 2015 to 2016 but then slightly increased 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 thousands)
Net income (loss) attributable to shareholders hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in thousands)
Adjusted net income (loss) attributable to shareholders hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

2017 Calculations

1 ROE = 100 × Net income (loss) attributable to shareholders ÷ Shareholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to shareholders ÷ 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. Allergan PLC’s adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

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 thousands)
Net income (loss) attributable to shareholders 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 thousands)
Adjusted net income (loss) attributable to shareholders 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: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18), 10-K (filing date: 2014-02-25).

2017 Calculations

1 ROA = 100 × Net income (loss) attributable to shareholders ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to shareholders ÷ 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. Allergan PLC’s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.