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Microsoft Excel LibreOffice Calc

Home Depot Inc. (HD)


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Income taxes are accounted for under the asset and liability method. Home Depot provides for federal, state, and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date.

Home Depot recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Home Depot files a consolidated U.S. federal income tax return which includes certain eligible subsidiaries. Non-U.S. subsidiaries and certain U.S. subsidiaries, which are consolidated for financial reporting purposes, are not eligible to be included in Home Depot’s consolidated U.S. federal income tax return. Separate provisions for income taxes have been determined for these entities. For unremitted earnings of the non-U.S. subsidiaries, Home Depot is required to make an assertion regarding reinvestment or repatriation for tax purposes. For any earnings that Home Depot does not make a permanent reinvestment assertion, Home Depot recognizes a provision for deferred income taxes. For earnings where Home Depot has made a permanent reinvestment assertion, no provision is recognized.

Source: 10-K (filing date: 2019-03-28).


Income Tax Expense (Benefit)

Home Depot Inc., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
Federal hidden hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Current hidden hidden hidden hidden hidden hidden
Federal hidden hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden hidden
Deferred hidden hidden hidden hidden hidden hidden
Provision for income taxes hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Home Depot Inc.’s current increased from 2017 to 2018 but then declined significantly from 2018 to 2019.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Home Depot Inc.’s deferred increased from 2017 to 2018 but then slightly declined from 2018 to 2019.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Home Depot Inc.’s provision for income taxes increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Effective Income Tax Rate (EITR)

Home Depot Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
Federal statutory income tax rate hidden hidden hidden hidden hidden hidden
Federal, state and foreign effective tax rate hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

Item Description The company
Federal, state and foreign effective tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Home Depot Inc.’s federal, state and foreign effective tax rate increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

Home Depot Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
Deferred compensation hidden hidden hidden hidden hidden hidden
Accrued self-insurance liabilities hidden hidden hidden hidden hidden hidden
State income taxes hidden hidden hidden hidden hidden hidden
Non-deductible reserves hidden hidden hidden hidden hidden hidden
Capital loss carryover hidden hidden hidden hidden hidden hidden
Net operating losses hidden hidden hidden hidden hidden hidden
Impairment of investment hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Deferred tax assets hidden hidden hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden hidden hidden
Deferred tax assets after valuation allowance hidden hidden hidden hidden hidden hidden
Merchandise inventories hidden hidden hidden hidden hidden hidden
Property and equipment hidden hidden hidden hidden hidden hidden
Goodwill and other intangibles hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Deferred tax liabilities hidden hidden hidden hidden hidden hidden
Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

Item Description The company
Deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Home Depot Inc.’s deferred tax assets declined from 2017 to 2018 and from 2018 to 2019.
Deferred tax assets after valuation allowance Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Home Depot Inc.’s deferred tax assets after valuation allowance declined from 2017 to 2018 and from 2018 to 2019.
Net deferred tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Home Depot Inc.’s net deferred tax assets (liabilities) declined from 2017 to 2018 and from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

Home Depot Inc., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

Item Description The company
Noncurrent deferred tax assets (included in Other 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. Home Depot Inc.’s noncurrent deferred tax assets (included in Other assets) increased from 2017 to 2018 and from 2018 to 2019.
Noncurrent deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Home Depot Inc.’s noncurrent deferred tax liabilities increased from 2017 to 2018 and from 2018 to 2019.

Analyst Adjustments: Removal of Deferred Taxes

Home Depot Inc., adjustments to financial data

US$ in millions

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
Adjustment to Current Assets
Current assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden hidden
Current assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax assets, net hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Current Liabilities
Current liabilities (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Current liabilities (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Liabilities
Total liabilities (as reported) hidden hidden hidden hidden hidden hidden
Less: Current deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax liabilities, net hidden hidden hidden hidden hidden hidden
Total liabilities (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Stockholders’ Equity (deficit)
Stockholders’ equity (deficit) (as reported) hidden hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden hidden
Stockholders’ equity (deficit) (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Earnings
Net earnings (as reported) hidden hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Net earnings (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).


Home Depot Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Home Depot Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
Current Ratio
Reported current ratio hidden hidden hidden hidden hidden hidden
Adjusted current ratio hidden hidden hidden hidden hidden hidden
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden hidden
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Home Depot Inc.’s adjusted current ratio deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Home Depot Inc.’s adjusted net profit margin improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Home Depot Inc.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.
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.
Home Depot Inc.’s adjusted financial leverage increased from 2017 to 2018 but then declined significantly from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Home Depot Inc.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Home Depot Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

Home Depot Inc., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
As Reported
Selected Financial Data (US$ in millions)
Current assets hidden hidden hidden hidden hidden hidden
Current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Current ratio1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets hidden hidden hidden hidden hidden hidden
Adjusted current liabilities hidden hidden hidden hidden hidden hidden
Ratio
Adjusted current ratio2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

2019 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. Home Depot Inc.’s adjusted current ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

2019 Calculations

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

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net sales
= 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. Home Depot Inc.’s adjusted net profit margin improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
As Reported
Selected Financial Data (US$ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

2019 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

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Home Depot Inc.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Stockholders’ equity (deficit) hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted stockholders’ equity (deficit) hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

2019 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity (deficit)
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity (deficit)
= 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.
Home Depot Inc.’s adjusted financial leverage increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Stockholders’ equity (deficit) hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Adjusted stockholders’ equity (deficit) hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

2019 Calculations

1 ROE = 100 × Net earnings ÷ Stockholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted stockholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Home Depot Inc.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Feb 3, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Feb 1, 2015 Feb 2, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).

2019 Calculations

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

2 Adjusted ROA = 100 × Adjusted net earnings ÷ 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. Home Depot Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.