LyondellBasell Industries N.V. (NYSE:LYB)

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

LyondellBasell Industries N.V., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Tax attributes	180)	196)	255)	322)	409)
Employee benefit plans	334)	315)	404)	406)	468)
Other assets	76)	97)	72)	73)	93)
Deferred tax assets	590)	608)	731)	801)	970)
Deferred tax asset valuation allowances	(120)	(96)	(96)	(125)	(134)
Net deferred tax assets	470)	512)	635)	676)	836)
Accelerated tax depreciation	(1,809)	(1,523)	(1,910)	(1,519)	(1,464)
Investment in joint venture partnerships	(147)	(214)	(304)	(300)	(276)
Intangible assets	(151)	(48)	(140)	(215)	(264)
Inventory	(285)	(266)	(379)	(440)	(528)
Other liabilities	(22)	(26)	(41)	(124)	(58)
Deferred tax liabilities	(2,414)	(2,077)	(2,774)	(2,598)	(2,590)
Net deferred tax assets (liabilities)	(1,944)	(1,565)	(2,139)	(1,922)	(1,754)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

The net deferred tax position remained consistently in a liability state from 2014 to 2018, with the net deferred tax liability fluctuating between -1,565 million and -2,139 million US dollars.

Deferred Tax Assets (DTA) Trends: A consistent downward trend is observed in gross deferred tax assets, which decreased from 970 million US dollars in 2014 to 590 million US dollars by 2018. This decline is primarily driven by a reduction in tax attributes, which fell from 409 million to 180 million US dollars, and a decrease in employee benefit plans from 468 million to 334 million US dollars. Net deferred tax assets followed a similar trajectory, declining from 836 million to 470 million US dollars over the five-year period.
Deferred Tax Liabilities (DTL) Trends: Deferred tax liabilities exhibited volatility, ending at -2,414 million US dollars in 2018 compared to -2,590 million US dollars in 2014. The primary driver of these liabilities is accelerated tax depreciation, which remained the most significant component, peaking at -1,910 million US dollars in 2016 and -1,809 million US dollars in 2018. Conversely, liabilities related to inventory showed a marked decrease, improving from -528 million in 2014 to -285 million by 2018, and investment in joint venture partnerships saw a steady reduction from -276 million to -147 million US dollars.
Net Deferred Tax Position Analysis: The net deferred tax liability position widened from -1,754 million US dollars in 2014 to -1,944 million US dollars in 2018. While there was a notable reduction in the net liability in 2017 to -1,565 million US dollars, the subsequent increase in 2018 suggests a return to higher liability levels. This movement was largely influenced by a resurgence in accelerated tax depreciation and a spike in liabilities related to intangible assets, which rose from -48 million in 2017 to -151 million US dollars in 2018.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

LyondellBasell Industries N.V., deferred tax assets and liabilities, classification

US$ in millions

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Deferred tax assets, current	—)	—)	—)	—)	67)
Deferred tax assets, long-term	31)	90)	192)	205)	271)
Deferred tax liability, current	—)	—)	—)	—)	469)
Deferred tax liability, long-term	1,975)	1,655)	2,331)	2,127)	1,623)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

The analysis of deferred tax accounts reveals a sustained trend toward a higher net deferred tax liability position over the five-year period ending December 31, 2018.

Long-Term Deferred Tax Assets: A consistent and significant downward trend is observed in long-term deferred tax assets, which decreased from 271 million US dollars in 2014 to 31 million US dollars in 2018. This represents a steady erosion of future tax benefits available to the organization over the analyzed period.
Long-Term Deferred Tax Liabilities: Long-term deferred tax liabilities exhibited notable volatility. The balance increased from 1,623 million US dollars in 2014 to a peak of 2,331 million US dollars in 2016. While a substantial reduction to 1,655 million US dollars occurred in 2017, the balance rebounded to 1,975 million US dollars by the end of 2018.
Net Deferred Tax Position: The convergence of declining deferred tax assets and elevated deferred tax liabilities has resulted in an expansion of the net long-term deferred tax liability. The disparity between these two accounts widened significantly by 2018, indicating a growing future tax obligation.
Current Tax Classifications: Current deferred tax balances were only recorded for the 2014 period, with current assets valued at 67 million US dollars and current liabilities valued at 469 million US dollars, reflecting a net current deferred tax liability at the start of the analyzed timeframe.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

LyondellBasell Industries N.V., Financial Data: Reported vs. Adjusted

LyondellBasell Industries N.V., adjustments to financial statements

US$ in millions

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Adjustment to Current Assets
Current assets (as reported)	10,566)	11,738)	9,599)	9,789)	11,645)
Less: Current deferred tax assets, net	—)	—)	—)	—)	67)
Current assets (adjusted)	10,566)	11,738)	9,599)	9,789)	11,578)
Adjustment to Total Assets
Total assets (as reported)	28,278)	26,206)	23,442)	22,757)	24,283)
Less: Current deferred tax assets, net	—)	—)	—)	—)	67)
Less: Noncurrent deferred tax assets, net	31)	90)	192)	205)	271)
Total assets (adjusted)	28,247)	26,116)	23,250)	22,552)	23,945)
Adjustment to Current Liabilities
Current liabilities (as reported)	5,513)	4,777)	4,540)	4,349)	5,437)
Less: Current deferred tax liabilities, net	—)	—)	—)	—)	469)
Current liabilities (adjusted)	5,513)	4,777)	4,540)	4,349)	4,968)
Adjustment to Total Liabilities
Total liabilities (as reported)	17,882)	17,256)	17,369)	16,183)	15,939)
Less: Current deferred tax liabilities, net	—)	—)	—)	—)	469)
Less: Noncurrent deferred tax liabilities, net	1,975)	1,655)	2,331)	2,127)	1,623)
Total liabilities (adjusted)	15,907)	15,601)	15,038)	14,056)	13,847)
Adjustment to Total Company Share Of Stockholders’ Equity
Total Company share of stockholders’ equity (as reported)	10,257)	8,949)	6,048)	6,550)	8,314)
Less: Net deferred tax assets (liabilities)	(1,944)	(1,565)	(2,139)	(1,922)	(1,754)
Total Company share of stockholders’ equity (adjusted)	12,201)	10,514)	8,187)	8,472)	10,068)
Adjustment to Net Income Attributable To The Company Shareholders
Net income attributable to the Company shareholders (as reported)	4,688)	4,879)	3,836)	4,476)	4,174)
Add: Deferred income tax expense (benefit)	260)	(587)	357)	181)	177)
Net income attributable to the Company shareholders (adjusted)	4,948)	4,292)	4,193)	4,657)	4,351)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

The removal of deferred taxes results in a consistent restructuring of the financial position, primarily characterized by a significant reduction in total liabilities and a corresponding increase in stockholders' equity. This adjustment provides a modified perspective on the company's solvency and net worth by eliminating the impact of future tax obligations and assets from the balance sheet.

Impact on Assets and Liabilities: A consistent downward adjustment is observed in total assets across the five-year period, although the magnitude of this difference decreased from 338 million US$ in 2014 to 31 million US$ in 2018. More significantly, total liabilities are substantially lower in adjusted terms. The difference between reported and adjusted total liabilities remained large throughout the period, peaking at 2,331 million US$ in 2016. The removal of deferred tax liabilities notably improves the reported liability profile, particularly in 2014 where current liabilities were adjusted downward by 469 million US$.
Effect on Stockholders' Equity: The elimination of deferred taxes leads to a marked increase in the adjusted total Company share of stockholders' equity compared to reported figures. This positive variance ranged from 1,565 million US$ in 2017 to 2,139 million US$ in 2016. Consequently, the adjusted equity reflects a stronger capital position than the reported equity, with the adjusted balance growing from 10,068 million US$ in 2014 to 12,201 million US$ in 2018.
Adjustments to Net Income: Adjusted net income attributable to Company shareholders generally exceeded reported net income for most of the period. Notable increases were observed in 2016, where adjusted net income was 357 million US$ higher than reported. However, a reversal occurred in 2017, where reported net income of 4,879 million US$ was significantly higher than the adjusted figure of 4,292 million US$, indicating a 587 million US$ reduction upon the removal of deferred tax effects. By 2018, the trend returned to a positive adjustment of 260 million US$.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

LyondellBasell Industries N.V., Financial Ratios: Reported vs. Adjusted

LyondellBasell Industries N.V., adjusted financial ratios

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Current Ratio
Reported current ratio	1.92	2.46	2.11	2.25	2.14
Adjusted current ratio	1.92	2.46	2.11	2.25	2.33
Net Profit Margin
Reported net profit margin	12.02%	14.15%	13.14%	13.67%	9.15%
Adjusted net profit margin	12.69%	12.45%	14.37%	14.23%	9.54%
Total Asset Turnover
Reported total asset turnover	1.38	1.32	1.24	1.44	1.88
Adjusted total asset turnover	1.38	1.32	1.26	1.45	1.90
Financial Leverage
Reported financial leverage	2.76	2.93	3.88	3.47	2.92
Adjusted financial leverage	2.32	2.48	2.84	2.66	2.38
Return on Equity (ROE)
Reported ROE	45.71%	54.52%	63.43%	68.34%	50.20%
Adjusted ROE	40.55%	40.82%	51.22%	54.97%	43.22%
Return on Assets (ROA)
Reported ROA	16.58%	18.62%	16.36%	19.67%	17.19%
Adjusted ROA	17.52%	16.43%	18.03%	20.65%	18.17%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

The analysis of financial ratios from 2014 to 2018 reveals a consistent divergence between reported figures and adjusted figures resulting from the removal of deferred taxes. While certain operational efficiency and liquidity metrics remain largely unaffected, there is a significant impact on leverage and return metrics, suggesting that deferred tax liabilities played a substantial role in the reported capital structure and equity returns.

Liquidity and Operational Efficiency: The current ratio exhibits minimal variance between reported and adjusted values from 2015 through 2018, with both metrics converging at 1.92 by the end of the period. A slight discrepancy is noted in 2014, where the adjusted ratio was higher at 2.33 compared to the reported 2.14. Total asset turnover shows negligible differences between the two measurement methods, maintaining a trend of decline from 2014 (approximately 1.90) to a low in 2016 (approximately 1.25), followed by a gradual recovery to 1.38 by 2018.
Profitability and Asset Utilization: Net profit margins remained relatively stable across both reporting methods, generally fluctuating between 9% and 14%. The adjusted net profit margin peaked in 2016 at 14.37%, while the reported margin peaked in 2017 at 14.15%. Regarding Return on Assets (ROA), the adjusted figures were higher than reported figures from 2014 to 2016, peaking at 20.65% in 2015, before shifting to a lower position than reported figures in 2017.
Capital Structure and Equity Returns: The most pronounced differences appear in financial leverage and Return on Equity (ROE). Reported financial leverage consistently exceeded adjusted leverage across all five years, with the widest gap occurring in 2016 (3.88 reported versus 2.84 adjusted). This indicates that the removal of deferred taxes significantly lowers the perceived risk profile regarding solvency. Similarly, Reported ROE was substantially higher than Adjusted ROE throughout the period. Reported ROE peaked at 68.34% in 2015 and declined to 45.71% by 2018, while the Adjusted ROE followed a similar downward trajectory from a peak of 54.97% in 2015 to 40.55% in 2018.

Overall, the removal of deferred taxes leads to a more conservative representation of the company's financial leverage and equity returns, while leaving liquidity and asset turnover ratios largely unchanged. The systemic overstatement of ROE and financial leverage in the reported figures suggests that tax-related accounting entries significantly influenced the perception of capital efficiency and risk during this period.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	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	10,566)	11,738)	9,599)	9,789)	11,645)
Current liabilities	5,513)	4,777)	4,540)	4,349)	5,437)
Liquidity Ratio
Current ratio¹	1.92	2.46	2.11	2.25	2.14
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets	10,566)	11,738)	9,599)	9,789)	11,578)
Adjusted current liabilities	5,513)	4,777)	4,540)	4,349)	4,968)
Liquidity Ratio
Adjusted current ratio²	1.92	2.46	2.11	2.25	2.33

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= 10,566 ÷ 5,513 = 1.92

² Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= 10,566 ÷ 5,513 = 1.92

The analysis of liquidity metrics from 2014 to 2018 reveals a fluctuating short-term solvency position that peaked in 2017 before experiencing a notable decline in 2018. The alignment between reported and adjusted figures throughout most of the period suggests a high degree of consistency in financial reporting, with the exception of the initial year.

Adjusted Current Ratio Trends: The adjusted current ratio demonstrated volatility over the five-year period. After starting at 2.33 in 2014, the ratio declined to 2.11 by 2016, recovered to a period high of 2.46 in 2017, and subsequently dropped to 1.92 in 2018. The 2018 figure represents the lowest liquidity level in the series, indicating a reduction in the cushion available to cover short-term obligations.
Current Asset Fluctuations: Adjusted current assets showed a non-linear trend, decreasing from 11,578 million US$ in 2014 to a low of 9,599 million US$ in 2016. A significant rebound occurred in 2017, with assets reaching 11,738 million US$, before contracting again to 10,566 million US$ by December 31, 2018.
Current Liability Trajectory: Adjusted current liabilities remained relatively stable between 2015 and 2017, fluctuating within a narrow range between 4,349 million US$ and 4,777 million US$. However, a sharp increase was observed in 2018, where liabilities rose to 5,513 million US$. This increase in obligations, coupled with a decrease in current assets, served as the primary driver for the decline in the current ratio during the final year.
Analysis of Reported versus Adjusted Variance: A divergence between reported and adjusted financial figures is present only in the 2014 data. In 2014, the adjusted current liabilities were lower than the reported liabilities (4,968 million US$ versus 5,437 million US$), which resulted in an adjusted current ratio of 2.33 compared to a reported ratio of 2.14. From 2015 through 2018, the reported and adjusted values for assets, liabilities, and ratios are identical, indicating that no adjustments were applied to the liquidity metrics in those years.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	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 attributable to the Company shareholders	4,688)	4,879)	3,836)	4,476)	4,174)
Sales and other operating revenues	39,004)	34,484)	29,183)	32,735)	45,608)
Profitability Ratio
Net profit margin¹	12.02%	14.15%	13.14%	13.67%	9.15%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to the Company shareholders	4,948)	4,292)	4,193)	4,657)	4,351)
Sales and other operating revenues	39,004)	34,484)	29,183)	32,735)	45,608)
Profitability Ratio
Adjusted net profit margin²	12.69%	12.45%	14.37%	14.23%	9.54%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ Net profit margin = 100 × Net income attributable to the Company shareholders ÷ Sales and other operating revenues
= 100 × 4,688 ÷ 39,004 = 12.02%

² Adjusted net profit margin = 100 × Adjusted net income attributable to the Company shareholders ÷ Sales and other operating revenues
= 100 × 4,948 ÷ 39,004 = 12.69%

The financial performance from 2014 to 2018 is characterized by an initial period of significant margin expansion followed by a phase of stabilization. While net income experienced fluctuations, the overall trajectory for adjusted net income was positive, peaking at US$ 4,948 million in 2018.

Adjusted Net Profit Margin Trends: A substantial increase in the adjusted net profit margin is observed between 2014 and 2015, moving from 9.54% to 14.23%. This elevated level of profitability was maintained through 2016, reaching a peak of 14.37%, before retreating to 12.45% in 2017 and slightly recovering to 12.69% in 2018.
Comparison of Reported versus Adjusted Metrics: Adjusted net income and profit margins generally exceeded reported figures for the majority of the period, suggesting that non-recurring items typically weighed down reported results. A notable exception occurred in 2017, when the reported net profit margin of 14.15% surpassed the adjusted margin of 12.45%, and reported net income of US$ 4,879 million exceeded adjusted net income of US$ 4,292 million, indicating the impact of positive one-time gains or tax benefits during that fiscal year.
Operational Profitability Stability: Following the growth observed in 2015, both reported and adjusted profit margins remained consistently above the 12% threshold through 2018. This indicates a sustained improvement in the company's ability to convert revenue into profit compared to the 9.15% reported margin recorded in 2014.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Sales and other operating revenues	39,004)	34,484)	29,183)	32,735)	45,608)
Total assets	28,278)	26,206)	23,442)	22,757)	24,283)
Activity Ratio
Total asset turnover¹	1.38	1.32	1.24	1.44	1.88
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Sales and other operating revenues	39,004)	34,484)	29,183)	32,735)	45,608)
Adjusted total assets	28,247)	26,116)	23,250)	22,552)	23,945)
Activity Ratio
Adjusted total asset turnover²	1.38	1.32	1.26	1.45	1.90

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ Total asset turnover = Sales and other operating revenues ÷ Total assets
= 39,004 ÷ 28,278 = 1.38

² Adjusted total asset turnover = Sales and other operating revenues ÷ Adjusted total assets
= 39,004 ÷ 28,247 = 1.38

The efficiency of asset utilization exhibited a significant downward trend in the first half of the analyzed period, followed by a moderate recovery. While the total asset base expanded steadily from 2016 through 2018, the asset turnover ratios remained below the levels recorded at the start of the period, indicating a shift in the relationship between asset growth and revenue generation.

Adjusted Total Asset Turnover Trend: A notable decline in the adjusted total asset turnover ratio is observed between 2014 and 2016, falling from 1.90 to a period low of 1.26. This indicates a reduction in the company's ability to generate sales relative to its adjusted asset base. Starting in 2017, a reversal of this trend occurred, with the ratio increasing to 1.32 in 2017 and reaching 1.38 by December 31, 2018.
Asset Base Expansion: Adjusted total assets experienced a slight contraction in 2015, decreasing to 22,552 million US$. Subsequently, a consistent growth pattern emerged, with assets rising to 23,250 million US$ in 2016, 26,116 million US$ in 2017, and peaking at 28,247 million US$ in 2018. The growth in the asset base during the recovery phase of the turnover ratio suggests increased investment in capacity or resources.
Reported versus Adjusted Variance: The variance between reported and adjusted metrics is minimal throughout the five-year period. For the total asset turnover ratio, the adjusted figures were slightly higher than reported figures in 2014, 2015, and 2016, but converged completely to 1.32 and 1.38 in 2017 and 2018, respectively. This suggests that the adjustments made to the asset totals did not materially alter the assessment of operational efficiency.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	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	28,278)	26,206)	23,442)	22,757)	24,283)
Total Company share of stockholders’ equity	10,257)	8,949)	6,048)	6,550)	8,314)
Solvency Ratio
Financial leverage¹	2.76	2.93	3.88	3.47	2.92
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	28,247)	26,116)	23,250)	22,552)	23,945)
Adjusted total Company share of stockholders’ equity	12,201)	10,514)	8,187)	8,472)	10,068)
Solvency Ratio
Adjusted financial leverage²	2.32	2.48	2.84	2.66	2.38

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ Financial leverage = Total assets ÷ Total Company share of stockholders’ equity
= 28,278 ÷ 10,257 = 2.76

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Company share of stockholders’ equity
= 28,247 ÷ 12,201 = 2.32

Between 2014 and 2018, total assets exhibited an overall upward trajectory after an initial dip in 2015. Reported total assets grew from 24,283 million US dollars in 2014 to 28,278 million US dollars by the end of 2018. This growth was mirrored in the adjusted total assets, which rose from 23,945 million US dollars to 28,247 million US dollars over the same period.

Equity Trends and Adjustments: Stockholders' equity experienced significant volatility, declining from 2014 through 2016 before recovering strongly in 2017 and 2018. Reported equity reached a low of 6,048 million US dollars in 2016 but increased to 10,257 million US dollars by 2018. Adjusted equity consistently remained higher than reported equity in every period, with the gap widening by 2018, where adjusted equity reached 12,201 million US dollars compared to the reported 10,257 million US dollars.
Financial Leverage Dynamics: A correlation is observed between equity fluctuations and financial leverage ratios. Both reported and adjusted leverage peaked in 2016 at 3.88 and 2.84, respectively, coinciding with the period of lowest stockholders' equity. Following 2016, leverage ratios declined steadily. By 2018, reported financial leverage fell to 2.76 and adjusted financial leverage decreased to 2.32.
Comparative Analysis of Reported vs. Adjusted Leverage: The adjusted financial leverage ratio is consistently lower than the reported ratio across the entire five-year span. The variance between the two metrics indicates that the adjustments applied to assets and equity reduce the perceived risk and financial gearing of the company. By 2018, the adjusted leverage ratio of 2.32 was slightly lower than the 2014 initial ratio of 2.38, suggesting an improvement in the adjusted capital structure over the long term.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	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 attributable to the Company shareholders	4,688)	4,879)	3,836)	4,476)	4,174)
Total Company share of stockholders’ equity	10,257)	8,949)	6,048)	6,550)	8,314)
Profitability Ratio
ROE¹	45.71%	54.52%	63.43%	68.34%	50.20%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to the Company shareholders	4,948)	4,292)	4,193)	4,657)	4,351)
Adjusted total Company share of stockholders’ equity	12,201)	10,514)	8,187)	8,472)	10,068)
Profitability Ratio
Adjusted ROE²	40.55%	40.82%	51.22%	54.97%	43.22%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ ROE = 100 × Net income attributable to the Company shareholders ÷ Total Company share of stockholders’ equity
= 100 × 4,688 ÷ 10,257 = 45.71%

² Adjusted ROE = 100 × Adjusted net income attributable to the Company shareholders ÷ Adjusted total Company share of stockholders’ equity
= 100 × 4,948 ÷ 12,201 = 40.55%

An analysis of the financial performance from 2014 to 2018 reveals a period of volatility in net income and a significant expansion of the equity base, which collectively influenced the Return on Equity (ROE).

Net Income Trends: Reported net income experienced fluctuations throughout the period, peaking at 4,879 million US$ in 2017. Adjusted net income followed a similar trajectory but generally remained higher than reported figures, reaching its maximum of 4,948 million US$ in 2018. The variance between reported and adjusted net income suggests that non-recurring items impacted reported earnings differently across the five-year span.
Equity Base Evolution: Total stockholders' equity exhibited a U-shaped trend. Both reported and adjusted equity declined from 2014 through 2016, reaching a low point in 2016 at 6,048 million US$ and 8,187 million US$ respectively. This was followed by a substantial increase in 2017 and 2018, with adjusted equity rising to 12,201 million US$ by the end of 2018, representing a significant expansion of the capital base.
Return on Equity (ROE) Analysis: A clear downward trend in ROE is observed following a peak in 2015. Reported ROE reached a high of 68.34% in 2015 before declining to 45.71% in 2018. Similarly, adjusted ROE peaked at 54.97% in 2015 and decreased to 40.55% by 2018. The contraction in ROE during the latter part of the period is primarily attributable to the rapid growth in stockholders' equity, which outpaced the growth in net income.
Comparison of Reported and Adjusted Metrics: Reported ROE remained consistently higher than adjusted ROE across all years analyzed. This discrepancy is driven by the fact that reported equity was systematically lower than adjusted equity. The smaller denominator in the reported calculation resulted in a higher ROE percentage, even in years where reported net income was lower than adjusted net income.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	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 attributable to the Company shareholders	4,688)	4,879)	3,836)	4,476)	4,174)
Total assets	28,278)	26,206)	23,442)	22,757)	24,283)
Profitability Ratio
ROA¹	16.58%	18.62%	16.36%	19.67%	17.19%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to the Company shareholders	4,948)	4,292)	4,193)	4,657)	4,351)
Adjusted total assets	28,247)	26,116)	23,250)	22,552)	23,945)
Profitability Ratio
Adjusted ROA²	17.52%	16.43%	18.03%	20.65%	18.17%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ ROA = 100 × Net income attributable to the Company shareholders ÷ Total assets
= 100 × 4,688 ÷ 28,278 = 16.58%

² Adjusted ROA = 100 × Adjusted net income attributable to the Company shareholders ÷ Adjusted total assets
= 100 × 4,948 ÷ 28,247 = 17.52%

An analysis of the financial performance from 2014 to 2018 reveals a consistent divergence between reported and adjusted financial metrics, particularly concerning net income and the resulting return on assets (ROA). While both reported and adjusted figures follow similar directional trends, the adjusted metrics generally present a more favorable view of operational efficiency by removing non-recurring items.

Net Income Trends: Adjusted net income remained higher than reported net income in four of the five years analyzed. The most significant divergence occurred in 2016 and 2018, where adjusted figures provided a higher valuation of earnings. A notable exception occurred in 2017, where reported net income of 4,879 million US$ exceeded adjusted net income of 4,292 million US$, suggesting the presence of one-time gains or tax benefits that inflated the reported figure for that period.
Asset Base Expansion: Total assets, both reported and adjusted, exhibited a general upward trajectory after a slight contraction in 2015. Reported total assets increased from 22,757 million US$ in 2015 to 28,278 million US$ by the end of 2018. The narrow variance between reported and adjusted total assets indicates that the adjustments made to the balance sheet were minimal relative to the overall scale of the company's holdings.
Return on Assets (ROA) Performance: The Adjusted ROA peaked in 2015 at 20.65%, reflecting a period of high capital efficiency. Subsequently, a downward trend was observed, reaching a low of 16.43% in 2017 before recovering slightly to 17.52% in 2018. In contrast, the Reported ROA demonstrated higher volatility, fluctuating between a high of 19.67% in 2015 and a low of 16.36% in 2016.
Comparative Efficiency Analysis: The Adjusted ROA remained consistently higher than the Reported ROA from 2014 through 2016 and again in 2018. This indicates that when non-operational or non-recurring items are excluded, the company demonstrated a superior ability to generate profit from its asset base. The reversal of this pattern in 2017, where Reported ROA (18.62%) surpassed Adjusted ROA (16.43%), aligns with the spike in reported net income observed for that year.

AI Ask an analyst for more