Boston Scientific Corp. (NYSE:BSX)

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Boston Scientific Corp., effective income tax rate (EITR) reconciliation

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
U.S. federal statutory income tax rate	21.00%	21.00%	21.00%	21.00%	21.00%
State income taxes, net of federal benefit	0.70%	2.50%	-16.60%	6.70%	0.10%
Domestic taxes on foreign earnings	15.30%	6.80%	-155.40%	21.90%	0.50%
Effect of foreign taxes	-3.80%	-14.30%	40.70%	-47.60%	-8.40%
Acquisition-related	4.40%	-8.10%	16.70%	12.20%	2.10%
Research credit	-4.50%	-3.00%	43.00%	-4.20%	-2.60%
Valuation allowance	-1.30%	0.80%	42.00%	1.10%	-5.20%
Goodwill impairment charges	0.00%	0.00%	-3.70%	0.00%	0.00%
Compensation-related	0.60%	-0.60%	7.70%	-0.30%	-1.00%
Non-deductible expenses	0.40%	0.40%	-64.40%	3.60%	0.80%
Uncertain tax positions	7.70%	1.20%	96.80%	1.40%	-22.00%
Intra-entity asset transfers	0.00%	0.00%	-10.20%	-597.00%	0.00%
Return to provision	-2.10%	-5.70%	37.30%	-0.20%	-0.20%
Change in tax rates	-0.20%	1.90%	-51.80%	-0.20%	0.50%
Other, net	0.70%	0.40%	-6.00%	-2.40%	1.60%
Effective income tax rate, before TCJA net impact	38.90%	3.30%	-2.90%	-584.00%	-12.80%
TCJA net impact	0.00%	0.00%	0.00%	0.00%	-4.70%
Effective income tax rate	38.90%	3.30%	-2.90%	-584.00%	-17.50%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The effective income tax rate exhibited extreme volatility between 2018 and 2022, transitioning from significant negative rates to a positive rate that substantially exceeded the U.S. federal statutory rate by the end of the period.

Effective Income Tax Rate Trend: A dramatic fluctuation is observed in the effective income tax rate, which started at -17.50% in 2018 and reached a profound low of -584.00% in 2019. The rate then normalized upward to -2.90% in 2020 and 3.30% in 2021, before climbing sharply to 38.90% in 2022. This trajectory indicates a shift from substantial tax benefits to a significant tax burden relative to pre-tax income.
Primary Drivers of Volatility: The extreme anomaly in 2019 was almost exclusively driven by intra-entity asset transfers, which contributed a negative 597.00% to the tax rate. In 2020, high volatility continued with significant offsetting movements: domestic taxes on foreign earnings (-155.40%) and non-deductible expenses (-64.40%) provided massive benefits, while uncertain tax positions (96.80%), valuation allowances (42.00%), and research credits (43.00%) acted as substantial offsets.
Analysis of Recurring Tax Adjustments: Uncertain tax positions remained a persistent and volatile factor, shifting from a benefit of -22.00% in 2018 to a significant charge of 96.80% in 2020, before settling at 7.70% in 2022. Research credits generally provided a consistent tax benefit, ranging from -2.60% to -4.50% in most years, with the exception of a sharp spike to 43.00% in 2020.
Foreign Tax and Statutory Influence: While the U.S. federal statutory income tax rate remained constant at 21.00% throughout the five-year period, the effective rate deviated sharply due to international operations. The effect of foreign taxes typically provided a benefit, though 2020 saw a reversal to a charge of 40.70%. By 2022, domestic taxes on foreign earnings increased to 15.30%, contributing to the overall increase in the final effective tax rate.
Recent Fiscal Positioning: By the end of 2022, the tax profile shifted toward a more conventional, albeit high, tax expense. The effective income tax rate of 38.90% reflects a convergence of positive contributions from domestic taxes on foreign earnings, uncertain tax positions, and acquisition-related adjustments, marking a complete reversal from the tax-benefit positions seen between 2018 and 2020.

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Boston Scientific Corp., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Inventory costs and related reserves	19)	10)	10)	—)	18)
Tax benefit of net operating loss and credits	511)	620)	557)	545)	450)
Reserves and accruals	304)	324)	308)	258)	258)
Restructuring-related charges	6)	14)	23)	20)	12)
Litigation and product liability reserves	103)	127)	82)	168)	221)
Investment write-down	38)	31)	—)	42)	28)
Compensation related	136)	130)	134)	121)	106)
Federal benefit of uncertain tax positions	9)	8)	9)	10)	10)
Intangible assets	3,666)	3,546)	3,551)	3,447)	—)
Capitalized R&D	160)	67)	4)	—)	—)
Property, plant and equipment	2)	14)	—)	—)	—)
Other	—)	35)	(10)	—)	37)
Deferred tax assets	4,954)	4,926)	4,668)	4,611)	1,140)
Valuation allowance	(1,004)	(1,014)	(887)	(915)	(344)
Deferred tax assets, less valuation allowance	3,950)	3,912)	3,781)	3,696)	796)
Property, plant and equipment	—)	—)	(1)	(16)	(25)
Unrealized gains and losses on derivative financial instruments	(117)	(79)	(12)	(52)	(44)
Investment write-up	—)	—)	(34)	—)	—)
Intangible assets	—)	—)	—)	—)	(968)
Inventory costs and related services	—)	—)	—)	(2)	—)
Other	(34)	—)	—)	(25)	—)
Deferred tax liabilities	(151)	(79)	(47)	(95)	(1,037)
Net deferred tax assets (liabilities)	3,799)	3,833)	3,734)	3,601)	(241)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The net deferred tax position experienced a significant structural shift between 2018 and 2022, transitioning from a net deferred tax liability of $241 million to a net deferred tax asset of $3.799 billion. This reversal is primarily attributed to a substantial increase in deferred tax assets and a corresponding decrease in deferred tax liabilities over the five-year period.

Growth of Deferred Tax Assets: Total deferred tax assets grew from $1.140 billion in 2018 to $4.954 billion in 2022. The most significant increase occurred between 2018 and 2019, driven largely by the emergence of intangible assets as a primary component, which rose from an unlisted value in 2018 to $3.447 billion in 2019 and further increased to $3.666 billion by 2022. Tax benefits from net operating losses and credits also showed an upward trend, peaking at $620 million in 2021 before moderating to $511 million in 2022.
Valuation Allowance Trends: To account for the realizability of deferred tax assets, a valuation allowance was maintained, increasing from $344 million in 2018 to $1.004 billion in 2022. Despite this increase in the contra-asset account, the net deferred tax assets, less valuation allowance, increased steadily from $796 million in 2018 to $3.950 billion in 2022.
Reduction in Deferred Tax Liabilities: Deferred tax liabilities declined sharply from $1.037 billion in 2018 to $151 million in 2022. A critical driver of this reduction was the elimination of intangible asset liabilities, which stood at $968 million in 2018 but were no longer reported as liabilities in subsequent years. Conversely, liabilities related to unrealized gains and losses on derivative financial instruments showed a consistent increase, growing from $44 million in 2018 to $117 million in 2022.
Other Asset Components: Additional contributors to deferred tax assets include reserves and accruals, which remained relatively stable between $258 million and $324 million, and compensation-related assets, which grew slightly from $106 million in 2018 to $136 million in 2022. Capitalized R&D began appearing in 2020 at $4 million and expanded rapidly to $160 million by 2022.

Overall, the financial data indicates a strategic shift in the tax balance sheet, characterized by the accumulation of significant intangible-related tax assets and the simultaneous resolution of previous tax liabilities, resulting in a strong net deferred tax asset position by the end of 2022.

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Boston Scientific Corp., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
	Deferred tax assets	3,942)	4,142)	4,210)	4,196)	87)
	Deferred tax liabilities	144)	310)	330)	595)	328)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

A significant shift in the deferred tax profile occurred between 2018 and 2022, characterized by a substantial increase in deferred tax assets and a general reduction in deferred tax liabilities after a brief peak in 2019. The overall trajectory indicates a transition from a net liability position to a strong net asset position.

Deferred Tax Assets (DTA): A dramatic increase is observed between December 31, 2018, and December 31, 2019, where assets rose from 87 million USD to 4,196 million USD. Following this surge, the balance remained relatively stable, peaking at 4,210 million USD in 2020 before entering a period of gradual decline, ending at 3,942 million USD by December 31, 2022.
Deferred Tax Liabilities (DTL): Deferred tax liabilities experienced a temporary spike in 2019, reaching 595 million USD. However, a consistent downward trend followed, with liabilities decreasing to 330 million USD in 2020, 310 million USD in 2021, and reaching a five-year low of 144 million USD by the end of 2022.
Net Deferred Tax Position: The net tax position shifted from a deficit of 241 million USD in 2018 to a substantial net asset position starting in 2019. This net asset balance peaked in 2020 at approximately 3,880 million USD and remained robust through 2022, concluding the period at 3,798 million USD. The converging trend of decreasing liabilities and stabilized assets has reinforced the company's net deferred tax asset standing.

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Boston Scientific Corp., Financial Data: Reported vs. Adjusted

Boston Scientific Corp., adjustments to financial statements

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Adjustment to Total Assets
Total assets (as reported)	32,469)	32,229)	30,777)	30,565)	20,999)
Less: Noncurrent deferred tax assets, net	3,942)	4,142)	4,210)	4,196)	87)
Total assets (adjusted)	28,527)	28,087)	26,567)	26,369)	20,912)
Adjustment to Total Liabilities
Total liabilities (as reported)	14,896)	15,608)	15,451)	16,688)	12,273)
Less: Noncurrent deferred tax liabilities, net	144)	310)	330)	595)	328)
Total liabilities (adjusted)	14,752)	15,298)	15,121)	16,093)	11,945)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	17,573)	16,622)	15,326)	13,877)	8,726)
Less: Net deferred tax assets (liabilities)	3,799)	3,833)	3,734)	3,601)	(241)
Stockholders’ equity (adjusted)	13,774)	12,789)	11,592)	10,276)	8,967)
Adjustment to Net Income (loss)
Net income (loss) (as reported)	698)	1,041)	(82)	4,700)	1,671)
Add: Deferred income tax expense (benefit)	(7)	(142)	(85)	(4,288)	(162)
Net income (loss) (adjusted)	691)	899)	(167)	412)	1,509)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The analysis of financial adjustments reveals a significant divergence between reported and adjusted figures, primarily driven by the removal of deferred tax components. This impact became most pronounced in 2019 and remained substantial through 2022, fundamentally altering the perception of the asset base, equity position, and net income.

Asset Base Compression: A marked decrease in total assets is observed when transitioning from reported to adjusted figures. While the difference was negligible in 2018, a substantial gap emerged in 2019 and persisted through 2022. By the end of 2022, reported total assets of 32,469 million US$ were adjusted downward to 28,527 million US$, indicating that a significant portion of the reported asset value is comprised of deferred tax assets.
Impact on Stockholders' Equity: The removal of deferred taxes resulted in a systemic reduction of stockholders' equity starting in 2019. While adjusted equity was slightly higher than reported equity in 2018, a sharp reversal occurred thereafter. From 2019 to 2022, adjusted stockholders' equity remained consistently and significantly lower than reported equity, with the variance remaining above 3 billion US$ annually for the latter part of the period.
Net Income Anomalies: The most extreme adjustment occurred in 2019, where reported net income of 4,700 million US$ was adjusted down to 412 million US$. This suggests a substantial non-recurring tax benefit—likely the release of a valuation allowance—that inflated reported earnings. In contrast, the variance between reported and adjusted net income narrowed significantly from 2020 onwards, reaching near parity by 2022.
Liability Stability: Adjusted total liabilities remained closely aligned with reported liabilities throughout the five-year period. The differences remained relatively minor, peaking at 595 million US$ in 2019 and decreasing to 144 million US$ by 2022. This indicates that the removal of deferred tax liabilities had a far less material impact on the balance sheet than the removal of deferred tax assets.

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Boston Scientific Corp., Financial Ratios: Reported vs. Adjusted

Boston Scientific Corp., adjusted financial ratios

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net Profit Margin
Reported net profit margin	5.50%	8.76%	-0.83%	43.78%	17.01%
Adjusted net profit margin	5.45%	7.56%	-1.68%	3.84%	15.36%
Total Asset Turnover
Reported total asset turnover	0.39	0.37	0.32	0.35	0.47
Adjusted total asset turnover	0.44	0.42	0.37	0.41	0.47
Financial Leverage
Reported financial leverage	1.85	1.94	2.01	2.20	2.41
Adjusted financial leverage	2.07	2.20	2.29	2.57	2.33
Return on Equity (ROE)
Reported ROE	3.97%	6.26%	-0.54%	33.87%	19.15%
Adjusted ROE	5.02%	7.03%	-1.44%	4.01%	16.83%
Return on Assets (ROA)
Reported ROA	2.15%	3.23%	-0.27%	15.38%	7.96%
Adjusted ROA	2.42%	3.20%	-0.63%	1.56%	7.22%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The analysis of financial ratios from 2018 to 2022 reveals a significant divergence between reported and adjusted figures, primarily driven by the impact of deferred taxes. The most pronounced distortions occur in 2019, where reported profitability metrics were substantially inflated compared to adjusted values, suggesting a one-time tax benefit that skewed the reported performance.

Profitability Margins and Returns: A substantial discrepancy is observed in the net profit margin for 2019, where the reported margin peaked at 43.78% while the adjusted margin was significantly lower at 3.84%. This indicates that deferred tax accounting heavily influenced the reported bottom line during that period. Similarly, the reported Return on Equity (ROE) and Return on Assets (ROA) show extreme volatility, with a reported ROE of 33.87% and ROA of 15.38% in 2019, which collapse to 4.01% and 1.56% respectively when adjusted for deferred taxes.; From 2021 to 2022, the gap between reported and adjusted profitability narrowed, with both sets of metrics showing a downward trend in net profit margin, moving toward a convergence around 5.45% to 5.50% by the end of 2022.
Asset Efficiency and Utilization: Total asset turnover exhibits a consistent pattern where adjusted ratios are higher than reported ratios from 2019 through 2022. For instance, by December 31, 2022, the adjusted turnover stood at 0.44 compared to the reported 0.39. This suggests that the removal of deferred tax assets reduces the total asset base, thereby improving the perceived efficiency of asset utilization in the adjusted view.
Financial Leverage and Capital Structure: There is an inverse relationship between reported and adjusted financial leverage. While reported leverage showed a steady decline from 2.41 in 2018 to 1.85 in 2022, the adjusted leverage remained consistently higher, peaking at 2.57 in 2019 and ending at 2.07 in 2022. This indicates that deferred tax assets likely inflated the reported equity base, thereby masking a higher actual leverage position when those tax effects are removed.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income (loss)	698)	1,041)	(82)	4,700)	1,671)
Net sales	12,682)	11,888)	9,913)	10,735)	9,823)
Profitability Ratio
Net profit margin¹	5.50%	8.76%	-0.83%	43.78%	17.01%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss)	691)	899)	(167)	412)	1,509)
Net sales	12,682)	11,888)	9,913)	10,735)	9,823)
Profitability Ratio
Adjusted net profit margin²	5.45%	7.56%	-1.68%	3.84%	15.36%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Net profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × 698 ÷ 12,682 = 5.50%

² Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Net sales
= 100 × 691 ÷ 12,682 = 5.45%

The financial performance from 2018 to 2022 is characterized by significant volatility in both reported and adjusted profitability metrics. A notable peak in reported figures occurred in 2019, followed by a transition to negative margins in 2020 and a subsequent partial recovery through 2022.

Adjusted Net Profit Margin Trends: The adjusted net profit margin experienced a sharp decline from 15.36% in 2018 to 3.84% in 2019, reaching a trough of -1.68% in 2020. A recovery was observed in 2021 with a margin of 7.56%, which subsequently moderated to 5.45% by the end of 2022.
Divergence Between Reported and Adjusted Metrics: A substantial disparity is observed in 2019, where the reported net profit margin reached 43.78% while the adjusted margin remained low at 3.84%. This indicates that reported net income was heavily influenced by non-recurring items or tax-related adjustments that did not reflect core operational performance.
Convergence of Profitability Measures: In the 2021 and 2022 fiscal years, a convergence between reported and adjusted margins is evident. By December 31, 2022, the reported net profit margin of 5.50% and the adjusted net profit margin of 5.45% aligned closely, suggesting a reduction in the volatility caused by one-time financial adjustments.
Net Income Recovery Analysis: Following a net loss in 2020, both reported and adjusted net income returned to positive territory in 2021. However, a slight downward trend is noted between 2021 and 2022, with reported net income decreasing from 1,041 million US$ to 698 million US$.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net sales	12,682)	11,888)	9,913)	10,735)	9,823)
Total assets	32,469)	32,229)	30,777)	30,565)	20,999)
Activity Ratio
Total asset turnover¹	0.39	0.37	0.32	0.35	0.47
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales	12,682)	11,888)	9,913)	10,735)	9,823)
Adjusted total assets	28,527)	28,087)	26,567)	26,369)	20,912)
Activity Ratio
Adjusted total asset turnover²	0.44	0.42	0.37	0.41	0.47

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 12,682 ÷ 32,469 = 0.39

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 12,682 ÷ 28,527 = 0.44

Analysis of asset utilization and turnover from 2018 to 2022 reveals a cycle of rapid asset expansion followed by a gradual recovery in operational efficiency. Total assets experienced a substantial increase between 2018 and 2019, rising from 20,999 million to 30,565 million, followed by a period of moderated growth through 2022.

Total Asset Growth and Adjustments: Reported total assets grew from 20,999 million in 2018 to 32,469 million by 2022. Adjusted total assets followed a similar upward trajectory but remained consistently lower than reported values from 2019 onward. The variance between reported and adjusted assets widened significantly starting in 2019, suggesting the exclusion of specific asset classes or accounting adjustments to better isolate core operational assets.
Reported Total Asset Turnover: The reported turnover ratio exhibited a U-shaped trend, declining from 0.47 in 2018 to a minimum of 0.32 in 2020. This contraction indicates that the rapid growth in the asset base initially outpaced revenue generation. A recovery phase followed, with the ratio climbing to 0.37 in 2021 and 0.39 in 2022.
Adjusted Total Asset Turnover: The adjusted turnover ratio provides a higher baseline for efficiency than the reported ratio. While it also experienced a decline from 0.47 in 2018 to 0.37 in 2020, the decrease was less pronounced than that observed in the reported figures. The ratio subsequently improved to 0.42 in 2021 and 0.44 in 2022, signaling an enhanced ability to generate revenue relative to the adjusted asset base.

The correlation between the recovery of both reported and adjusted turnover ratios from 2021 to 2022 suggests a systemic improvement in asset productivity. The fact that the adjusted turnover remains consistently higher than the reported turnover indicates that the assets being adjusted out of the calculation were contributing more to the asset base than to the generation of top-line revenue.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Total assets	32,469)	32,229)	30,777)	30,565)	20,999)
Stockholders’ equity	17,573)	16,622)	15,326)	13,877)	8,726)
Solvency Ratio
Financial leverage¹	1.85	1.94	2.01	2.20	2.41
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	28,527)	28,087)	26,567)	26,369)	20,912)
Adjusted stockholders’ equity	13,774)	12,789)	11,592)	10,276)	8,967)
Solvency Ratio
Adjusted financial leverage²	2.07	2.20	2.29	2.57	2.33

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 32,469 ÷ 17,573 = 1.85

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 28,527 ÷ 13,774 = 2.07

The financial position between 2018 and 2022 is characterized by a consistent expansion of the asset base and a substantial increase in stockholders' equity. This growth has contributed to an overall reduction in financial leverage, although notable discrepancies exist between reported and adjusted figures.

Asset and Equity Trends: Reported total assets increased from US$ 20,999 million in 2018 to US$ 32,469 million by 2022. During the same period, reported stockholders' equity experienced a significant upward trajectory, nearly doubling from US$ 8,726 million to US$ 17,573 million. Adjusted figures followed a similar growth pattern but at a more moderate pace; adjusted total assets rose to US$ 28,527 million and adjusted stockholders' equity increased to US$ 13,774 million by the end of 2022.
Reported Financial Leverage: A steady downward trend is observed in reported financial leverage, which declined linearly from 2.41 in 2018 to 1.85 in 2022. This progression indicates a systematic reduction in the reliance on debt relative to equity over the five-year period.
Adjusted Financial Leverage: Adjusted financial leverage exhibited greater volatility than the reported metric. The ratio increased from 2.33 in 2018 to a peak of 2.57 in 2019, before entering a period of steady decline to reach 2.07 by 2022. From 2019 onward, the adjusted leverage remained consistently higher than the reported leverage, indicating that the adjustments made to the balance sheet components result in a higher calculated leverage ratio than the reported figures suggest.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income (loss)	698)	1,041)	(82)	4,700)	1,671)
Stockholders’ equity	17,573)	16,622)	15,326)	13,877)	8,726)
Profitability Ratio
ROE¹	3.97%	6.26%	-0.54%	33.87%	19.15%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss)	691)	899)	(167)	412)	1,509)
Adjusted stockholders’ equity	13,774)	12,789)	11,592)	10,276)	8,967)
Profitability Ratio
Adjusted ROE²	5.02%	7.03%	-1.44%	4.01%	16.83%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 698 ÷ 17,573 = 3.97%

² Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted stockholders’ equity
= 100 × 691 ÷ 13,774 = 5.02%

Financial performance between 2018 and 2022 was characterized by significant volatility in earnings and a consistent expansion of the equity base. While stockholders' equity grew steadily throughout the period, net income and the resulting return on equity experienced sharp fluctuations, most notably during the 2019 to 2020 transition.

Net Income Trends: Reported net income exhibited substantial variance, peaking at US$ 4,700 million in 2019 before declining to a loss of US$ 82 million in 2020. A notable discrepancy exists between reported and adjusted net income in 2019, where the reported figure was significantly higher than the adjusted figure of US$ 412 million. This suggests the presence of substantial non-recurring gains in the reported results for that fiscal year. Recovery was observed in 2021 and 2022, with adjusted net income stabilizing at US$ 899 million and US$ 691 million, respectively.
Stockholders' Equity Growth: A consistent upward trajectory is observed in equity levels. Reported stockholders' equity increased from US$ 8,726 million in 2018 to US$ 17,573 million by 2022. Similarly, adjusted stockholders' equity rose from US$ 8,967 million to US$ 13,774 million over the same period. This steady accumulation of equity suggests a sustained increase in the company's book value despite the volatility in annual net income.
Return on Equity (ROE) Interpretation: The variance between reported and adjusted ROE highlights the impact of non-operational items on financial ratios. In 2019, reported ROE reached a peak of 33.87%, while adjusted ROE was significantly lower at 4.01%, confirming that core operational profitability did not drive the reported surge. Both metrics turned negative in 2020, with adjusted ROE reaching -1.44%. Although ROE recovered in 2021 and 2022, the adjusted ROE of 5.02% in 2022 remains well below the 16.83% recorded in 2018, reflecting the combined effect of lower adjusted earnings and a significantly larger equity base.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in millions)
Net income (loss)	698)	1,041)	(82)	4,700)	1,671)
Total assets	32,469)	32,229)	30,777)	30,565)	20,999)
Profitability Ratio
ROA¹	2.15%	3.23%	-0.27%	15.38%	7.96%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss)	691)	899)	(167)	412)	1,509)
Adjusted total assets	28,527)	28,087)	26,567)	26,369)	20,912)
Profitability Ratio
Adjusted ROA²	2.42%	3.20%	-0.63%	1.56%	7.22%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 698 ÷ 32,469 = 2.15%

² Adjusted ROA = 100 × Adjusted net income (loss) ÷ Adjusted total assets
= 100 × 691 ÷ 28,527 = 2.42%

The financial performance from 2018 to 2022 is characterized by significant volatility in net income and a consistent expansion of the total asset base. While reported figures show extreme fluctuations, particularly in 2019, the adjusted figures provide a more stabilized view of operational efficiency, although both metrics reflect a notable downturn in 2020.

Net Income Trends: Reported net income experienced a sharp peak of US$ 4,700 million in 2019, followed by a decline into a net loss of US$ 82 million in 2020. Adjusted net income shows a marked divergence in 2019, recorded at US$ 412 million, which suggests the impact of substantial non-recurring items or tax adjustments in the reported figures. Recovery occurred in 2021 and 2022, with adjusted net income reaching US$ 899 million and US$ 691 million, respectively.
Asset Growth: A steady upward trend is observed in the company's asset base. Reported total assets increased from US$ 20,999 million in 2018 to US$ 32,469 million by the end of 2022. Adjusted total assets followed a similar growth pattern, rising from US$ 20,912 million to US$ 28,527 million over the five-year period.
Adjusted and Reported ROA: The divergence between reported and adjusted Return on Assets (ROA) was most pronounced in 2019, where Reported ROA spiked to 15.38% while Adjusted ROA fell to 1.56%. In 2020, both metrics turned negative, with Adjusted ROA reaching its lowest point at -0.63%. From 2021 onward, the two metrics converged, with Adjusted ROA stabilizing at 3.20% in 2021 and 2.42% in 2022, indicating a normalization of earnings relative to the asset base.

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