.Analysis of Income Taxes
Difficulty: Advanced
Income Tax Accounting Policy
Provisions for U.S. federal, state and local, and non-U.S. income taxes are calculated on reported Earnings before income taxes based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income tax provisions and evaluating tax positions.
The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Boeing records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on the tax return. To the extent that Boeing's assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. Tax-related interest and penalties are classified as a component of Income tax expense.
Source: Boeing Co., Annual Report
Income Tax Expense (Benefit)
Boeing Co., income tax expense (benefit), continuing operations
USD $ in millions
| 12 months ended | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | |
|---|---|---|---|---|---|---|
| | U.S. federal | |||||
| | Non-U.S. | |||||
| | U.S. state | |||||
| | Current tax expense | |||||
| | U.S. federal | |||||
| | Non-U.S. | |||||
| | U.S. state | |||||
| | Deferred tax expense | |||||
| | Income tax expense |
Source: Based on data from Boeing Co. Annual Reports
| Item | Description | The company |
|---|---|---|
| Current tax expense | The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations. | Boeing Co.'s current tax expense declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Deferred tax expense | The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations. | Boeing Co.'s deferred tax expense declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Income tax expense | The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy. | Boeing Co.'s income tax expense declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level. |
Effective Income Tax Rate (EITR)
Boeing Co., effective income tax rate (EITR) reconciliation
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | U.S. federal statutory tax | % | % | % | % | % |
| | Impact of Tax Cuts and Jobs Act | % | % | % | % | % |
| | Tax basis adjustment | % | % | % | % | % |
| | Federal audit settlements | % | % | % | % | % |
| | Excess tax benefits | % | % | % | % | % |
| | Research and development credits | % | % | % | % | % |
| | Amendments to the R&E regulations | % | % | % | % | % |
| | U.S. manufacturing activity tax benefit | % | % | % | % | % |
| | Tax on non-US activities | % | % | % | % | % |
| | Other provision adjustments | % | % | % | % | % |
| | Effective income tax rate | % | % | % | % | % |
Source: Based on data from Boeing Co. Annual Reports
| Item | Description | The company |
|---|---|---|
| Effective income tax rate | A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations. | Boeing Co.'s effective income tax rate declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Components of Deferred Tax Assets and Liabilities
Boeing Co., components of deferred tax assets and liabilities
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Deferred tax assets | |||||
| | Deferred tax liabilities | |||||
| | Valuation allowance | |||||
| | Net deferred tax assets (liabilities) |
Source: Based on data from Boeing Co. Annual Reports
| Item | Description | The company |
|---|---|---|
| Deferred tax assets | The sum of the tax effects as of the balance sheet date of the amounts of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws (before the valuation allowance, if any, to reduce such sum amount to net realizable value). Includes any tax benefit realized in deferred tax assets for significant impacts of tax planning strategies. | Boeing Co.'s deferred tax assets increased from 2015 to 2016 but then declined significantly from 2016 to 2017. |
| Net deferred tax assets (liabilities) | For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods. | Boeing 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
Boeing Co., deferred tax assets and liabilities, classification
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Current deferred tax asset | |||||
| | Non-current deferred tax asset | |||||
| | Current deferred tax liability | |||||
| | Non-current deferred tax liability |
Source: Based on data from Boeing Co. Annual Reports
| Item | Description | The company |
|---|---|---|
| Current deferred tax asset | The current portion of the aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; after deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. An unrecognized tax benefit that is directly related to a position taken in a tax year that results in a net operating loss carryforward should be presented as a reduction of the related deferred tax asset. | |
| Non-current deferred tax asset | The noncurrent portion as of the balance sheet date of the aggregate carrying amount of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; after the valuation allowance, if any, to reduce such amount to net realizable value. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. | Boeing Co.'s non-current deferred tax asset increased from 2015 to 2016 and from 2016 to 2017. |
| Current deferred tax liability | Represents the current portion of deferred tax liabilities, which result from applying the applicable tax rate to net taxable temporary differences pertaining to each jurisdiction to which the entity is obligated to pay income tax. A current taxable temporary difference is a difference between the tax basis and the carrying amount of a current asset or liability in the financial statements prepared in accordance with generally accepted accounting principles. In a classified statement of financial position, an enterprise shall separate deferred tax liabilities and assets into a current amount and a noncurrent amount. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. | |
| Non-current deferred tax liability | Represents the noncurrent portion of deferred tax liabilities, which result from applying the applicable tax rate to net taxable temporary differences pertaining to each jurisdiction to which the entity is obligated to pay income tax. A noncurrent taxable temporary difference is a difference between the tax basis and the carrying amount of a noncurrent asset or liability in the financial statements prepared in accordance with generally accepted accounting principles. In a classified statement of financial position, an enterprise shall separate deferred tax liabilities and assets into a current amount and a noncurrent amount. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. | Boeing Co.'s non-current deferred tax liability declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Analyst Adjustments: Removal of Deferred Taxes
Boeing Co., adjustments to financial data
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Adjustment to Current Assets | ||||||
| | Current assets (as reported) | |||||
| | Less: Current deferred tax assets, net | |||||
| | Current assets (adjusted) | |||||
| Adjustment to Total Assets | ||||||
| | Total assets (as reported) | |||||
| | Less: Current deferred tax assets, net | |||||
| | Less: Noncurrent deferred tax assets, net | |||||
| | Total assets (adjusted) | |||||
| Adjustment to Current Liabilities | ||||||
| | Current liabilities (as reported) | |||||
| | Less: Current deferred tax liabilities, net | |||||
| | Current liabilities (adjusted) | |||||
| Adjustment to Total Liabilities | ||||||
| | Total liabilities (as reported) | |||||
| | Less: Current deferred tax liabilities, net | |||||
| | Less: Noncurrent deferred tax liabilities, net | |||||
| | Total liabilities (adjusted) | |||||
| Adjustment to Shareholders’ Equity | ||||||
| | Shareholders’ equity (as reported) | |||||
| | Less: Net deferred tax assets (liabilities) | |||||
| | Shareholders’ equity (adjusted) | |||||
| Adjustment to Net Earnings Related To Parent | ||||||
| | Net earnings related to parent (as reported) | |||||
| | Add: Deferred income tax expense (benefit) | |||||
| | Net earnings related to parent (adjusted) | |||||
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Boeing Co., adjusted ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Current Ratio | ||||||
| | Reported current ratio | |||||
| | Adjusted current ratio | |||||
| 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 | % | % | % | % | % |
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. | Boeing Co.'s adjusted current ratio deteriorated from 2015 to 2016 and from 2016 to 2017. |
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Boeing Co.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Boeing Co.'s adjusted total asset turnover improved from 2015 to 2016 but then deteriorated significantly 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. |
Boeing 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. | Boeing Co.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Boeing Co.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Current Ratio
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Current assets (USD $ in millions) | |||||
| | Current liabilities (USD $ in millions) | |||||
| | Current ratio1 | |||||
| Adjusted for Deferred Taxes | ||||||
| | Adjusted current assets (USD $ in millions) | |||||
| | Adjusted current liabilities (USD $ in millions) | |||||
| | Adjusted current ratio2 | |||||
2017 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. | Boeing Co.'s adjusted current ratio deteriorated from 2015 to 2016 and from 2016 to 2017. |
Adjusted Net Profit Margin
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net earnings related to parent (USD $ in millions) | |||||
| | Revenues (USD $ in millions) | |||||
| | Net profit margin1 | % | % | % | % | % |
| Adjusted for Deferred Taxes | ||||||
| | Adjusted net earnings related to parent (USD $ in millions) | |||||
| | Adjusted net profit margin2 | % | % | % | % | % |
2017 Calculations
1 Net profit margin = 100 × Net earnings related to parent ÷ Revenues
= 100 × ÷ = %
2 Adjusted net profit margin = 100 × Adjusted net earnings related to parent ÷ Revenues
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by total revenue. | Boeing Co.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Total Asset Turnover
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Revenues (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | Total asset turnover1 | |||||
| Adjusted for Deferred Taxes | ||||||
| | Adjusted total assets (USD $ in millions) | |||||
| | Adjusted total asset turnover2 | |||||
2017 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. | Boeing Co.'s adjusted total asset turnover improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Financial Leverage
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Total assets (USD $ in millions) | |||||
| | Shareholders’ equity (USD $ in millions) | |||||
| | Financial leverage1 | |||||
| Adjusted for Deferred Taxes | ||||||
| | Adjusted total assets (USD $ in millions) | |||||
| | Adjusted shareholders’ equity (USD $ in millions) | |||||
| | Adjusted financial leverage2 | |||||
2017 Calculations
1 Financial leverage = Total assets ÷ Shareholders’ equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ 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. |
Boeing Co.'s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017. |
Adjusted Return on Equity (ROE)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net earnings related to parent (USD $ in millions) | |||||
| | Shareholders’ equity (USD $ in millions) | |||||
| | ROE1 | % | % | % | % | % |
| Adjusted for Deferred Taxes | ||||||
| | Adjusted net earnings related to parent (USD $ in millions) | |||||
| | Adjusted shareholders’ equity (USD $ in millions) | |||||
| | Adjusted ROE2 | % | % | % | % | % |
2017 Calculations
1 ROE = 100 × Net earnings related to parent ÷ Shareholders’ equity
= 100 × ÷ = %
2 Adjusted ROE = 100 × Adjusted net earnings related to parent ÷ Adjusted shareholders’ equity
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Boeing Co.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017. |
Adjusted Return on Assets (ROA)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net earnings related to parent (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | ROA1 | % | % | % | % | % |
| Adjusted for Deferred Taxes | ||||||
| | Adjusted net earnings related to parent (USD $ in millions) | |||||
| | Adjusted total assets (USD $ in millions) | |||||
| | Adjusted ROA2 | % | % | % | % | % |
2017 Calculations
1 ROA = 100 × Net earnings related to parent ÷ Total assets
= 100 × ÷ = %
2 Adjusted ROA = 100 × Adjusted net earnings related to parent ÷ Adjusted total assets
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Boeing Co.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
