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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 taking into account guidance related to uncertain tax positions. Tax laws require items to be included in tax filings at different times than the items are reflected in the financial statements. A current liability is recognized for the estimated taxes payable for the current year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are adjusted for enacted changes in tax rates and tax laws. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Source: Caterpillar Inc., Annual Report


Income Tax Expense (Benefit)

Caterpillar Inc., 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
U.S. hidden hidden hidden hidden hidden
Non-U.S. hidden hidden hidden hidden hidden
State (U.S.) hidden hidden hidden hidden hidden
Current tax provision hidden hidden hidden hidden hidden
U.S. hidden hidden hidden hidden hidden
Non-U.S. hidden hidden hidden hidden hidden
State (U.S.) hidden hidden hidden hidden hidden
Deferred tax provision (benefit) hidden hidden hidden hidden hidden
Provision for income taxes hidden hidden hidden hidden hidden

Source: Based on data from Caterpillar Inc. Annual Reports

Item Description The company
Current tax provision 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. Caterpillar Inc.'s current tax provision declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Deferred tax provision (benefit) 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. Caterpillar Inc.'s deferred tax provision (benefit) increased from 2015 to 2016 and from 2016 to 2017.
Provision for income taxes 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. Caterpillar Inc.'s provision for income taxes declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Effective Income Tax Rate (EITR)

Caterpillar Inc., 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
U.S. statutory tax rate hidden% hidden% hidden% hidden% hidden%
Non-U.S. subsidiaries taxed at other than 35% hidden% hidden% hidden% hidden% hidden%
State and local taxes, net of federal hidden% hidden% hidden% hidden% hidden%
Interest and penalties, net of tax hidden% hidden% hidden% hidden% hidden%
U.S. research and production incentives hidden% hidden% hidden% hidden% hidden%
ESOP dividend tax benefit hidden% hidden% hidden% hidden% hidden%
Net excess tax benefits from stock-based compensation hidden% hidden% hidden% hidden% hidden%
U.S. deferred tax rate change hidden% hidden% hidden% hidden% hidden%
Mandatory deemed repatriation of non-U.S. earnings hidden% hidden% hidden% hidden% hidden%
Valuation allowances hidden% hidden% hidden% hidden% hidden%
Nondeductible goodwill hidden% hidden% hidden% hidden% hidden%
Prior year tax and interest adjustments hidden% hidden% hidden% hidden% hidden%
Tax law change hidden% hidden% hidden% hidden% hidden%
Other, net hidden% hidden% hidden% hidden% hidden%
Increases (decreases) in taxes hidden% hidden% hidden% hidden% hidden%
Effective tax rate hidden% hidden% hidden% hidden% hidden%

Source: Based on data from Caterpillar Inc. Annual Reports

Item Description The company
Effective 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. Caterpillar Inc.'s effective tax rate increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

Components of Deferred Tax Assets and Liabilities

Caterpillar Inc., 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
Tax carryforwards hidden hidden hidden hidden hidden
Pension hidden hidden hidden hidden hidden
Postemployment benefits other than pensions hidden hidden hidden hidden hidden
Warranty reserves hidden hidden hidden hidden hidden
Stock-based compensation hidden hidden hidden hidden hidden
Allowance for credit losses hidden hidden hidden hidden hidden
Post sale discounts hidden hidden hidden hidden hidden
Other employee compensation and benefits hidden hidden hidden hidden hidden
Other, net hidden hidden hidden hidden hidden
Deferred income tax assets, gross hidden hidden hidden hidden hidden
Valuation allowance for deferred tax assets hidden hidden hidden hidden hidden
Deferred income tax assets hidden hidden hidden hidden hidden
Capital and intangible assets hidden hidden hidden hidden hidden
Bond discount hidden hidden hidden hidden hidden
Translation hidden hidden hidden hidden hidden
Other outside basis differences hidden hidden hidden hidden hidden
Undistributed profits of non-U.S. subsidiaries hidden hidden hidden hidden hidden
Deferred income tax liabilities hidden hidden hidden hidden hidden
Deferred income taxes, net hidden hidden hidden hidden hidden

Source: Based on data from Caterpillar Inc. Annual Reports

Item Description The company
Deferred income tax assets, gross 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. Caterpillar Inc.'s deferred income tax assets, gross increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Deferred income tax assets 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; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. Caterpillar Inc.'s deferred income tax assets increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Deferred income taxes, net 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. Caterpillar Inc.'s deferred income taxes, net increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Deferred Tax Assets and Liabilities, Classification

Caterpillar Inc., deferred tax assets and liabilities, classification

USD $ in millions

Microsoft Excel LibreOffice Calc

Source: Based on data from Caterpillar Inc. Annual Reports

Item Description The company
Current deferred income tax assets (included in Deferred and refundable income taxes) 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.
Noncurrent deferred income tax assets (included in Noncurrent deferred and refundable income taxes) 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. Caterpillar Inc.'s noncurrent deferred income tax assets (included in Noncurrent deferred and refundable income taxes) increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.
Current deferred tax liabilities (included in Other current liabilities) 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.
Noncurrent deferred tax liabilities (included in Other liabilities) 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. Caterpillar Inc.'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

Caterpillar Inc., 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 Equity Attributable To Common Stockholders
Equity attributable to common stockholders (as reported) hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden
Equity attributable to common stockholders (adjusted) hidden hidden hidden hidden hidden
Adjustment to Profit (loss) Attributable To Common Stockholders
Profit (loss) attributable to common stockholders (as reported) hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Profit (loss) attributable to common stockholders (adjusted) hidden hidden hidden hidden hidden

Adjusted Ratios: Removal of Deferred Taxes (Summary)

Caterpillar Inc., 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%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Caterpillar Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Caterpillar Inc.'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. Caterpillar Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Caterpillar Inc.'s adjusted financial leverage increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Caterpillar Inc.'s adjusted ROE deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Caterpillar Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Adjusted Current Ratio

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

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. Caterpillar Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 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
Profit (loss) attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Sales of Machinery, Energy & Transportation (USD $ in millions) hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Deferred Taxes
Adjusted profit (loss) attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 Net profit margin = 100 × Profit (loss) attributable to common stockholders ÷ Sales of Machinery, Energy & Transportation
= 100 × hidden ÷ hidden = hidden%

2 Adjusted net profit margin = 100 × Adjusted profit (loss) attributable to common stockholders ÷ Sales of Machinery, Energy & Transportation
= 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. Caterpillar Inc.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 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
Sales of Machinery, Energy & Transportation (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

2017 Calculations

1 Total asset turnover = Sales of Machinery, Energy & Transportation ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Sales of Machinery, Energy & Transportation ÷ 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. Caterpillar Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Equity attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted equity attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden

2017 Calculations

1 Financial leverage = Total assets ÷ Equity attributable to common stockholders
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted equity attributable to common stockholders
= 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.
Caterpillar Inc.'s adjusted financial leverage increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

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
Profit (loss) attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Equity attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Deferred Taxes
Adjusted profit (loss) attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted equity attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROE = 100 × Profit (loss) attributable to common stockholders ÷ Equity attributable to common stockholders
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Adjusted profit (loss) attributable to common stockholders ÷ Adjusted equity attributable to common stockholders
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Caterpillar Inc.'s adjusted ROE deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 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
Profit (loss) attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Deferred Taxes
Adjusted profit (loss) attributable to common stockholders (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROA = 100 × Profit (loss) attributable to common stockholders ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Adjusted profit (loss) attributable to common stockholders ÷ 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. Caterpillar Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.