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Income Tax Accounting Policy

DowDuPont accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted tax rates. The effect of a change in tax rates on deferred tax assets or liabilities is recognized in income in the period that includes the enactment date.

DowDuPont recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. DowDuPont accrues for other tax contingencies when it is probable that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. The current portion of uncertain income tax positions is included in "Income taxes payable" and the long-term portion is included in "Other noncurrent obligations" in the consolidated balance sheets.

Provision is made for taxes on undistributed earnings of foreign subsidiaries and related companies to the extent that such earnings are not deemed to be permanently invested.

Source: DowDuPont Inc., Annual Report

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Income Tax Expense (Benefit)

DowDuPont Inc., 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
Federal
State and local
Foreign
Current tax expense
Federal
State and local
Foreign
Deferred tax expense (benefit)
Provision (credit) for income taxes on continuing operations

Source: Based on data from DowDuPont Inc. 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. DowDuPont Inc.'s current tax expense declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Deferred tax expense (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. DowDuPont Inc.'s deferred tax expense (benefit) declined from 2015 to 2016 and from 2016 to 2017.
Provision (credit) for income taxes on continuing operations 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. DowDuPont Inc.'s provision (credit) for income taxes on continuing operations declined from 2015 to 2016 and from 2016 to 2017.

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Effective Income Tax Rate (EITR)

DowDuPont Inc., effective income tax rate (EITR) reconciliation

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Statutory U.S. federal income tax rate % % % % %
Effective tax rate % % % % %

Source: Based on data from DowDuPont 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. DowDuPont Inc.'s effective tax rate declined from 2015 to 2016 and from 2016 to 2017.

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Components of Deferred Tax Assets and Liabilities

DowDuPont Inc., 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
Property
Tax loss and credit carryforwards
Postretirement benefit obligations
Other accruals and reserves
Intangibles
Inventory
Long-term debt
Investments
Other, net
Deferred tax assets, gross
Valuation allowances
Deferred tax assets
Property
Postretirement benefit obligations
Other accruals and reserves
Intangibles
Inventory
Long-term debt
Investments
Unrealized exchange gains (losses), net
Other, net
Deferred tax liabilities
Net deferred tax asset (liability)

Source: Based on data from DowDuPont Inc. Annual Reports

Item Description The company
Deferred 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. DowDuPont Inc.'s deferred tax assets, gross increased from 2015 to 2016 and from 2016 to 2017.
Deferred 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. DowDuPont Inc.'s deferred tax assets increased from 2015 to 2016 and from 2016 to 2017.
Net deferred tax asset (liability) 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. DowDuPont Inc.'s net deferred tax asset (liability) increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

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Deferred Tax Assets and Liabilities, Classification

DowDuPont Inc., deferred tax assets and liabilities, classification

USD $ in millions

 

Source: Based on data from DowDuPont Inc. Annual Reports

Item Description The company
Current deferred tax assets 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 tax assets 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. DowDuPont Inc.'s noncurrent deferred tax assets increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.
Current deferred tax 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 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. DowDuPont Inc.'s noncurrent deferred tax liabilities increased from 2015 to 2016 and from 2016 to 2017.

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Analyst Adjustments: Removal of Deferred Taxes

DowDuPont Inc., 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 DowDuPont's Stockholders' Equity
DowDuPont's stockholders' equity (as reported)
Less: Net deferred tax assets (liabilities)
DowDuPont's stockholders' equity (adjusted)
Adjustment to Net Income Attributable To DowDuPont Inc.
Net income attributable to DowDuPont Inc. (as reported)
Add: Deferred income tax expense (benefit)
Net income attributable to DowDuPont Inc. (adjusted)

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Adjusted Ratios: Removal of Deferred Taxes (Summary)

DowDuPont Inc., 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. DowDuPont Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. DowDuPont Inc.'s adjusted net profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. DowDuPont Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
DowDuPont Inc.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. DowDuPont Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. DowDuPont Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

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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. DowDuPont Inc.'s adjusted current ratio deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

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Adjusted Net Profit Margin

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to DowDuPont Inc. (USD $ in millions)
Net sales (USD $ in millions)
Net profit margin1 % % % % %
Adjusted for Deferred Taxes
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions)
Adjusted net profit margin2 % % % % %

2017 Calculations

1 Net profit margin = 100 × Net income attributable to DowDuPont Inc. ÷ Net sales
= 100 × ÷ = %

2 Adjusted net profit margin = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Net sales
= 100 × ÷ = %

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. DowDuPont Inc.'s adjusted net profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.

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Adjusted Total Asset Turnover

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net sales (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 = Net sales ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. DowDuPont Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

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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)
DowDuPont's stockholders' equity (USD $ in millions)
Financial leverage1
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in millions)
Adjusted dowDuPont's stockholders' equity (USD $ in millions)
Adjusted financial leverage2

2017 Calculations

1 Financial leverage = Total assets ÷ DowDuPont's stockholders' equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted dowDuPont's stockholders' 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.
DowDuPont Inc.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

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Adjusted Return on Equity (ROE)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to DowDuPont Inc. (USD $ in millions)
DowDuPont's stockholders' equity (USD $ in millions)
ROE1 % % % % %
Adjusted for Deferred Taxes
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions)
Adjusted dowDuPont's stockholders' equity (USD $ in millions)
Adjusted ROE2 % % % % %

2017 Calculations

1 ROE = 100 × Net income attributable to DowDuPont Inc. ÷ DowDuPont's stockholders' equity
= 100 × ÷ = %

2 Adjusted ROE = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Adjusted dowDuPont's stockholders' equity
= 100 × ÷ = %

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. DowDuPont Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.

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Adjusted Return on Assets (ROA)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to DowDuPont Inc. (USD $ in millions)
Total assets (USD $ in millions)
ROA1 % % % % %
Adjusted for Deferred Taxes
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted ROA2 % % % % %

2017 Calculations

1 ROA = 100 × Net income attributable to DowDuPont Inc. ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Adjusted total assets
= 100 × ÷ = %

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. DowDuPont Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

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