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Microsoft Excel LibreOffice Calc

Linde plc (LIN)

Analysis of Income Taxes

Advanced level

Accounting Policy on Income Taxes

Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using currently enacted tax rates. Valuation allowances are established against deferred tax assets whenever circumstances indicate that it is more likely than not that such assets will not be realized in future periods.

Under the guidance for accounting for uncertainty in income taxes, Linde can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit can be recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, Linde accrues interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties are classified as income tax expense in the financial statements.

Source: 10-K (filing date: 2019-03-18).

Income Tax Expense (Benefit)

Linde plc, income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
U.S. federal
State and local
Foreign
Current tax expense
U.S. federal
State and local
Foreign
Deferred tax expense (benefit)
Provision for income taxes

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Item Description The company
Current tax expense Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Linde plc’s current tax expense increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.
Deferred tax expense (benefit) Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Linde plc’s deferred tax expense (benefit) increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Linde plc’s provision for income taxes increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Effective Income Tax Rate (EITR)

Linde plc, effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
U.S. statutory income tax rate
State and local taxes, net of federal benefit
U.S. tax credits and deductions
Foreign tax differentials
Venezuela currency devaluation
Share Based Compensation
Divestitures
Other, net
Effective tax rate, before Tax Act
Tax Act
Effective tax rate

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Item Description The company
Effective tax rate, before Tax Act Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Linde plc’s effective tax rate, before Tax Act increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

Linde plc, components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Carryforwards
Benefit plans and related
Inventory
Accruals and other
Deferred tax assets, before valuation allowances
Valuation allowances
Deferred tax assets
Fixed assets
Goodwill
Other intangible assets
Subsidiary/equity investments
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Item Description The company
Deferred tax assets, before valuation allowances Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Linde plc’s deferred tax assets, before valuation allowances decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Linde plc’s deferred tax assets decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
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. Linde plc’s net deferred tax assets (liabilities) increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

Linde plc, deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current deferred tax assets (included in Prepaid and other current assets)
Noncurrent deferred tax assets (included in Other long-term assets)
Noncurrent deferred tax liabilities (included in Deferred credits)

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Item Description The company
Noncurrent deferred tax assets (included in Other long-term 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. Linde plc’s noncurrent deferred tax assets (included in Other long-term assets) increased from 2016 to 2017 and from 2017 to 2018.
Noncurrent deferred tax liabilities (included in Deferred credits) Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Linde plc’s noncurrent deferred tax liabilities (included in Deferred credits) decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Adjustments to Financial Statements: Removal of Deferred Taxes

Linde plc, adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
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 Total Linde Plc Shareholders’ Equity
Total Linde plc shareholders’ equity (as reported)
Less: Net deferred tax assets (liabilities)
Total Linde plc shareholders’ equity (adjusted)
Adjustment to Net Income, Linde Plc
Net income, Linde plc (as reported)
Add: Deferred income tax expense (benefit)
Net income, Linde plc (adjusted)

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Linde plc, Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Linde plc, adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
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: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Linde plc’s adjusted current ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Linde plc’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. Linde plc’s adjusted total asset turnover ratio improved from 2016 to 2017 but then deteriorated significantly 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.		 Linde plc’s adjusted financial leverage ratio decreased from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Linde plc’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Linde plc’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

Linde plc, Financial Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
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: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

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

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

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Linde plc’s adjusted current ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income, Linde plc
Sales
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income, Linde plc
Sales
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Net profit margin = 100 × Net income, Linde plc ÷ Sales
= 100 × ÷ =

2 Adjusted net profit margin = 100 × Adjusted net income, Linde plc ÷ Sales
= 100 × ÷ =

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Linde plc’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

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Sales
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Sales
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Total asset turnover = Sales ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Linde plc’s adjusted total asset turnover ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets
Total Linde plc shareholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted total Linde plc shareholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Linde plc shareholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Linde plc shareholders’ equity
= ÷ =

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.		 Linde plc’s adjusted financial leverage ratio decreased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income, Linde plc
Total Linde plc shareholders’ equity
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income, Linde plc
Adjusted total Linde plc shareholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROE = 100 × Net income, Linde plc ÷ Total Linde plc shareholders’ equity
= 100 × ÷ =

2 Adjusted ROE = 100 × Adjusted net income, Linde plc ÷ Adjusted total Linde plc shareholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Linde plc’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income, Linde plc
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income, Linde plc
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROA = 100 × Net income, Linde plc ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Adjusted net income, Linde plc ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Linde plc’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.