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Microsoft Excel LibreOffice Calc

International Business Machines Corp. (NYSE:IBM)

Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)

International Business Machines Corp., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
U.S. federal
U.S. state and local
Non-U.S.
Current
U.S. federal
U.S. state and local
Non-U.S.
Deferred
Provision for income taxes

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. International Business Machines Corp.’s current decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. International Business Machines Corp.’s deferred increased from 2017 to 2018 but then decreased significantly 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. International Business Machines Corp.’s provision for income taxes decreased from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

International Business Machines Corp., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Statutory tax rate
Tax differential on foreign income
Intra-entity transfers
Domestic incentives
State and local
Japan resolution
Other
Effective tax rate, before enactment of U.S. tax reform
Enactment of U.S. tax reform
Effective tax rate

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

Item Description The company
Effective tax rate, before enactment of U.S. tax reform Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. International Business Machines Corp.’s effective tax rate, before enactment of U.S. tax reform increased from 2017 to 2018 and from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

International Business Machines Corp., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Retirement benefits
Leases
Share-based and other compensation
Domestic tax loss/credit carryforwards
Deferred income
Foreign tax loss/credit carryforwards
Bad debt, inventory and warranty reserves
Depreciation
Accruals
Intangible assets
Capitalized research and development
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Goodwill and intangible assets
GILTI deferred taxes
Leases and right-of-use assets
Depreciation
Retirement benefits
Software development costs
Deferred transition costs
Undistributed foreign earnings
Other
Gross deferred tax liabilities
Net deferred tax assets (liabilities)

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. International Business Machines Corp.’s gross deferred tax assets increased from 2017 to 2018 and from 2018 to 2019.
Net deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. International Business Machines Corp.’s net deferred tax assets increased 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. International Business Machines Corp.’s net deferred tax assets (liabilities) decreased from 2017 to 2018 and from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

International Business Machines Corp., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Deferred tax assets
Deferred tax liabilities

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

Item Description The company
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. International Business Machines Corp.’s deferred tax assets increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.
Deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. International Business Machines Corp.’s deferred tax liabilities increased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

International Business Machines Corp., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Assets
Total assets (as reported)
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 Total IBM Stockholders’ Equity
Total IBM stockholders’ equity (as reported)
Less: Net deferred tax assets (liabilities)
Total IBM stockholders’ equity (adjusted)
Adjustment to Net Income Attributable To IBM
Net income attributable to IBM (as reported)
Add: Deferred income tax expense (benefit)
Net income attributable to IBM (adjusted)

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

International Business Machines Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

International Business Machines Corp., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
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: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. International Business Machines Corp.’s adjusted net profit margin ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. International Business Machines Corp.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly 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.		 International Business Machines Corp.’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. International Business Machines Corp.’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. International Business Machines Corp.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

International Business Machines Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to IBM
Revenue
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to IBM
Revenue
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 Net profit margin = 100 × Net income attributable to IBM ÷ Revenue
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income attributable to IBM ÷ Revenue
= 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. International Business Machines Corp.’s adjusted net profit margin ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Revenue
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenue
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Revenue ÷ 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. International Business Machines Corp.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets
Total IBM stockholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted total IBM stockholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

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

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total IBM 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.		 International Business Machines Corp.’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to IBM
Total IBM stockholders’ equity
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to IBM
Adjusted total IBM stockholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 ROE = 100 × Net income attributable to IBM ÷ Total IBM stockholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income attributable to IBM ÷ Adjusted total IBM 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. International Business Machines Corp.’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to IBM
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to IBM
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 ROA = 100 × Net income attributable to IBM ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income attributable to IBM ÷ 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. International Business Machines Corp.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.