Accounting Policy on Income Taxes
Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

The provision for income taxes is based on pretax income reported in the consolidated statements of earnings and tax rates currently enacted in each jurisdiction. Certain income and expense items are recognized in different time periods for financial reporting and income tax filing purposes, and deferred income taxes are provided for the effect of temporary differences. Emerson also provides for foreign withholding taxes and any applicable U.S. income taxes on earnings intended to be repatriated from non-U.S. locations. No provision has been made for these taxes on approximately $3.4 billion of undistributed earnings of non-U.S. subsidiaries as of September 30, 2018, as these earnings are considered indefinitely invested or otherwise retained for continuing international operations. Recognition of foreign withholding taxes and any applicable U.S. income taxes on undistributed non-U.S. earnings would be triggered by a management decision to repatriate those earnings. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable.

Source: 10-K (filing date: 2018-11-19).

Emerson Electric Co., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended	Sep 30, 2018		Sep 30, 2017		Sep 30, 2016		Sep 30, 2015		Sep 30, 2014		Sep 30, 2013
	U.S. federal
	State and local
	Non-U.S.
	Current
	U.S. federal
	State and local
	Non-U.S.
	Deferred
	Income tax expense

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Emerson Electric Co.’s current declined from 2016 to 2017 and from 2017 to 2018.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Emerson Electric Co.’s deferred declined from 2016 to 2017 and from 2017 to 2018.
Income tax expense	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Emerson Electric Co.’s income tax expense declined from 2016 to 2017 and from 2017 to 2018.

Emerson Electric Co., effective income tax rate (EITR) reconciliation

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	U.S. federal statutory tax rate
	State and local taxes, net of U.S. federal tax benefit
	Non-U.S. rate differential
	Non-U.S. tax holidays
	U.S. manufacturing deduction
	Gains on divestitures
	Subsidiary restructuring
	Transition impact of Tax Act
	Spinoff-related
	Goodwill impairment
	Artesyn repatriation
	Other
	Effective income tax rate

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

Item	Description	The company
Effective income tax rate	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Emerson Electric Co.’s effective income tax rate declined from 2016 to 2017 and from 2017 to 2018.

Emerson Electric Co., components of deferred tax assets and liabilities

US$ in millions

		Sep 30, 2018		Sep 30, 2017		Sep 30, 2016		Sep 30, 2015		Sep 30, 2014		Sep 30, 2013
	Net operating losses and tax credits
	Accrued liabilities
	Postretirement and postemployment benefits
	Employee compensation and benefits
	Pensions
	Other
	Deferred tax assets, gross
	Valuation allowances
	Deferred tax assets, net
	Intangibles
	Pensions
	Property, plant and equipment
	Undistributed non-U.S. earnings
	Other
	Deferred tax liabilities
	Net deferred income tax asset (liability)

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

Item	Description	The company
Deferred tax assets, gross	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Emerson Electric Co.’s deferred tax assets, gross increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Deferred tax assets, net	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Emerson Electric Co.’s deferred tax assets, net declined from 2016 to 2017 and from 2017 to 2018.
Net deferred income tax asset (liability)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Emerson Electric Co.’s net deferred income tax asset (liability) declined from 2016 to 2017 and from 2017 to 2018.

Emerson Electric Co., deferred tax assets and liabilities, classification

US$ in millions

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	Current deferred tax assets, net
	Noncurrent deferred tax assets
	Noncurrent deferred tax liabilities

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

Item	Description	The company
Noncurrent deferred tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Emerson Electric Co.’s noncurrent deferred tax assets increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
Noncurrent deferred tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Emerson Electric Co.’s noncurrent deferred tax liabilities increased from 2016 to 2017 and from 2017 to 2018.

Emerson Electric Co., adjustments to financial statements

US$ in millions

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 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 Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Common Stockholders’ Equity
	Common stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Common stockholders’ equity (adjusted)
	Adjustment to Net Earnings Common Stockholders
	Net earnings common stockholders (as reported)
	Add: Deferred income tax expense (benefit)
	Net earnings common stockholders (adjusted)

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

Emerson Electric Co., Financial Data: Reported vs. Adjusted

Emerson Electric Co., adjusted financial ratios

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 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

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

Financial ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Emerson Electric Co.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Emerson Electric Co.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Emerson Electric Co.’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018.
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.	Emerson Electric Co.’s adjusted financial leverage ratio declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Emerson Electric Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Emerson Electric Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Emerson Electric Co., Financial Ratios: Reported vs. Adjusted

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	As Reported
	Selected Financial Data (US$ in millions)
	Current assets
	Current liabilities
	Liquidity Ratio
	Current ratio¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted current assets
	Current liabilities
	Liquidity Ratio
	Adjusted current ratio²

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

2018 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Liquidity ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Emerson Electric Co.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings common stockholders
	Net sales
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings common stockholders
	Net sales
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

2018 Calculations

¹ Net profit margin = 100 × Net earnings common stockholders ÷ Net sales
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net earnings common stockholders ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Emerson Electric Co.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	As Reported
	Selected Financial Data (US$ in millions)
	Net sales
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Net sales
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

2018 Calculations

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

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

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Emerson Electric Co.’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018.

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Common stockholders’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted common stockholders’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

2018 Calculations

¹ Financial leverage = Total assets ÷ Common stockholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted common stockholders’ equity
= hidden ÷ hidden = hidden

Solvency 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.	Emerson Electric Co.’s adjusted financial leverage ratio declined from 2016 to 2017 but then slightly increased from 2017 to 2018.

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings common stockholders
	Common stockholders’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings common stockholders
	Adjusted common stockholders’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

2018 Calculations

¹ ROE = 100 × Net earnings common stockholders ÷ Common stockholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net earnings common stockholders ÷ Adjusted common stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Emerson Electric Co.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

		Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014	Sep 30, 2013
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings common stockholders
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings common stockholders
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-19).

2018 Calculations

¹ ROA = 100 × Net earnings common stockholders ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net earnings common stockholders ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Emerson Electric Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

	Emerson Electric Co.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

Emerson Electric Co. (EMR)

Analysis of Income Taxes

Accounting Policy on Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

Emerson Electric Co., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Emerson Electric Co., Financial Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)