Analysis of 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 Net Profit Margin
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Income Tax Expense (Benefit)
Mastercard Inc., income tax expense (benefit), continuing operations
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Current Income Tax Expense
- The current income tax expense exhibits variability over the observed periods. Starting at 1,589 million US dollars in 2018, it slightly increased to 1,620 million in 2019. A decline occurred in 2020, where the figure dropped to 1,276 million. However, this was followed by a rebound in 2021 with an increase to 1,690 million, and a substantial rise in 2022 reaching 2,453 million, the highest value in the observed timeframe. This pattern indicates fluctuations that may correlate with changes in taxable income or tax rates, culminating in a marked increase in the latest year.
- Deferred Income Tax Expense
- The deferred income tax expense demonstrates a more volatile trend. It began with a negative value of -244 million US dollars in 2018, indicating a deferred tax benefit. In 2019, the balance neared zero at -7 million, suggesting a significant reduction in deferred tax benefits. In 2020, it shifted to a positive 73 million, reflecting deferred tax liabilities. The value fell back to -70 million in 2021, then sharply declined to -651 million in 2022, representing a substantial deferred tax benefit. These swings suggest considerable changes in the timing differences between accounting income and taxable income, potentially influenced by shifts in tax laws, temporary differences, or recognition of deferred tax assets.
- Total Income Tax Expense
- Total income tax expense, which combines current and deferred components, shows a steady increase over the years. Beginning at 1,345 million US dollars in 2018, it rose to 1,613 million in 2019, then decreased slightly to 1,349 million in 2020. Thereafter, the total tax expense increased consistently to 1,620 million in 2021 and further to 1,802 million in 2022. Despite fluctuations in deferred tax expense, the overall upward trend highlights an increasing tax burden over the period, consistent with the rising current tax expenses which form the majority of the total tax charge.
Effective Income Tax Rate (EITR)
Mastercard Inc., effective income tax rate (EITR) reconciliation
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- U.S. Federal Statutory Income Tax Rate
- The U.S. federal statutory income tax rate remained constant at 21% throughout the five-year period from 2018 to 2022, indicating no legislative changes impacting this rate.
- State Tax Effect, Net of Federal Benefit
- The state tax effect was relatively stable, with a slight fluctuation between 0.6% and 0.7%, suggesting consistent state-level tax impacts after federal adjustments.
- Foreign Tax Effect
- The foreign tax effect showed a progressive increase in its negative impact, moving from -1.3% in 2018 to -3.0% in 2022. This indicates increasing foreign tax burdens affecting the overall effective tax rate.
- Valuation Allowance, U.S. Foreign Tax Credit
- This component appeared only in 2022 as a negative 2.8%, reflecting a new valuation allowance potentially reducing anticipated tax credits related to foreign operations in that year.
- U.S. Tax Expense on Foreign Operations
- First reported in 2020, this expense showed a gradual rise from 0.6% in 2020 and 2021 to 0.9% in 2022, indicating growing tax liabilities on foreign-sourced income within the U.S. tax framework.
- Foreign-Derived Intangible Income Deduction
- The deduction value steadily increased in magnitude (more negative), expanding from -0.6% in 2020 to -1.1% in 2022, suggesting enhanced benefits or higher qualifying intangible income deductions over time.
- U.S. Tax Benefits
- These benefits were noted only in 2021 as a significant reduction of 1.3%, indicating one-off or specific tax benefit events that lowered the taxable income for that year.
- European Commission Fine
- A distinct 2.7% tax impact was recorded in 2018, with no subsequent entries, signaling a one-time fine that increased the effective tax burden in that year.
- Windfall Benefit
- Windfall benefits were consistently negative contributors, ranging from -1.0% in 2018 peaking at -1.5% in 2020 and then lessening to -0.6% by 2022, indicating fluctuating but persisting tax reductions or credits considered windfall in nature.
- Other, Net
- This category showed considerable volatility, starting at a -3.5% impact in 2018, decreasing sharply to -0.3% in 2020, and then varying to a positive 0.4% by 2022. This signifies that miscellaneous tax effects shifted from reducing the tax rate significantly to slightly increasing it in the most recent year.
- Effective Income Tax Rate, Before U.S. Tax Reform
- The effective tax rate before U.S. tax reform exhibited a downward trend overall, decreasing from 18.5% in 2018 to 15.4% in 2022, with some fluctuations in between, indicating an overall improvement in tax efficiency or favorable tax components mitigating the tax burden.
- Transition Tax
- Presented only in 2018 and 2019 with minor reversals (0.3% in 2018 and -0.3% in 2019), this likely reflects transitional adjustments related to tax reform impacts during those years.
- Remeasurement of Deferred Taxes
- This appeared solely in 2018 as a minimal negative effect (-0.1%), implying a small nonrecurring adjustment in deferred tax calculations during that year.
- Effective Income Tax Rate
- The overall effective income tax rate decreased from 18.7% in 2018 to 15.4% in 2022, mirroring the prior trend before tax reform. This decline suggests a steady reduction in the overall tax rate, influenced by various components including stable federal rates, increased deductions, and fluctuating foreign tax effects but offset by certain new allowances and expenses.
Components of Deferred Tax Assets and Liabilities
Mastercard Inc., components of deferred tax assets and liabilities
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The data reveals several notable trends in the financial figures over the five-year period ending December 31, 2022.
- Accrued liabilities
- These liabilities increased steadily from $297 million in 2018 to $697 million in 2022, indicating rising obligations or accrued expenses.
- Compensation and benefits
- There is a consistent upward trend in compensation and benefits, growing from $210 million in 2018 to $316 million in 2022, reflecting increased personnel costs or workforce expansion.
- State taxes and other credits
- These figures fluctuate but generally show a modest increase from $30 million in 2018 to $43 million in 2022, with some variation in between.
- Net operating losses
- Net operating losses rose from $104 million in 2018 to $156 million in 2022, indicating increasing carryforward losses or adjustments affecting taxable income.
- U.S. foreign tax credits
- Starting with no data in 2018, foreign tax credits show a sharp increase from $145 million in 2019, peaking at $333 million in 2021 before declining to $274 million in 2022. This suggests fluctuating foreign tax impacts across the years.
- Property, plant and equipment
- No values are reported between 2018 and 2021, with a notable increase to $52 million in 2022, indicating new asset acquisitions or capitalization in the latest period.
- Intangible assets
- Intangible assets exhibit moderate variability, initially decreasing from $170 million in 2018 to $157 million in 2019, then rising to $206 million in 2021 before a slight decrease to $186 million in 2022.
- Other items
- The amounts show fluctuations with a notable increase from $115 million in 2018 to $200 million in 2020, followed by a decline to around $161-162 million in 2021 and 2022.
- Deferred tax assets, gross
- A strong upward trend is observed, climbing steadily from $926 million in 2018 to $1,886 million in 2022, suggesting growing timing differences and deductible temporary differences on the balance sheet.
- Valuation allowance
- The valuation allowance increases significantly in absolute terms from -$94 million in 2018 to a peak negative value of -$415 million in 2021, before sharply decreasing to -$114 million in 2022. This pattern may indicate changes in the realizability assessment of deferred tax assets.
- Deferred tax assets, net
- Net deferred tax assets tend to increase over the period, though with a slowdown in growth from 2018 ($832 million) to 2021 ($1,218 million). In 2022, there is a sharp increase to $1,772 million, likely driven by the large reduction in valuation allowance.
- Prepaid expenses and other accruals
- These amounts are negative across all years, declining further from -$89 million in 2018 to -$186 million in 2022, implying an increasing recognition of prepaid expenses or adjustments related to accruals.
- Gains on equity investments
- Reported from 2020 onwards, these gains are negative, reaching a low of -$153 million in 2021 before slightly improving to -$132 million in 2022, indicating losses or write-downs related to equity holdings.
- Goodwill and intangible assets
- The values are recorded as negative and show a substantial increase in negative magnitude from -$125 million in 2018 to -$571 million in 2021, leveling off to -$561 million in 2022. This trend may reflect amortization, impairment, or adjustments affecting goodwill and intangible assets.
- Property, plant and equipment (negative values)
- The negative values grow from -$97 million in 2018 to a peak of -$183 million in 2020, then slightly improve to -$174 million in 2021 with no data for 2022, suggesting depreciation or asset disposals.
- Other items (negative values)
- A consistent increase in negative amounts is observed from -$18 million in 2018 to -$135 million in 2022, potentially indicating reserves, impairments, or other liabilities growing over time.
- Deferred tax liabilities
- Deferred tax liabilities increase significantly from -$329 million in 2018 to -$1,127 million in 2021, followed by a slight decrease to -$1,014 million in 2022, reflecting growing taxable temporary differences.
- Net deferred tax assets (liabilities)
- This metric declines from $503 million in 2018 to $91 million in 2021, representing a reduction in net deferred tax assets. A rebound to $758 million in 2022 indicates an improvement in net deferred tax position, likely influenced by changes in deferred tax assets and liabilities or valuation allowances.
Overall, the financial data demonstrates growing liabilities and compensation expenses, increasing deferred tax assets gross position, and fluctuations in valuation allowances that significantly affect the net deferred tax asset position. The rise in accrued liabilities and deferred tax liabilities highlights expanding obligations, while the intangible assets and goodwill show signs of impairments or amortization. The sharp reduction in valuation allowance in 2022 notably improves the net deferred tax assets.
Deferred Tax Assets and Liabilities, Classification
Mastercard Inc., deferred tax assets and liabilities, classification
US$ in millions
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Deferred tax assets | 1,151) | 486) | 491) | 543) | 570) | |
| Deferred tax liabilities | 393) | 395) | 86) | 85) | 67) |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial data exhibits notable fluctuations in deferred tax assets and liabilities over the analyzed five-year period. Deferred tax assets display a general decline from 2018 through 2021, followed by a significant increase in 2022. In contrast, deferred tax liabilities show a gradual increase initially, peaking in 2021, and then stabilizing without substantial change in 2022.
- Deferred Tax Assets
- From 2018 to 2021, deferred tax assets steadily decreased from 570 million US dollars to 486 million US dollars, representing a decline of approximately 14.7% over the four-year span. This downward trend reversed sharply in 2022, with deferred tax assets rising to 1,151 million US dollars, more than doubling the 2021 figure.
- Deferred Tax Liabilities
- Deferred tax liabilities increased gradually from 67 million US dollars in 2018 to 86 million US dollars in 2020. A marked rise occurred in 2021, when liabilities sharply climbed to 395 million US dollars, an increase of over 359% compared to the previous year. In 2022, the figures remained relatively steady, slightly decreasing to 393 million US dollars.
The contrasting movements between deferred tax assets and liabilities, especially the pronounced increases in 2021 and 2022, could reflect changes in the company's tax positions, accounting estimates, or specific tax-related events affecting temporary differences. The sharp increase in assets in 2022 suggests enhanced recognition of future tax benefits, while the elevated liabilities in 2021 and sustained high level in 2022 indicate substantial future tax obligations recorded in the financial statements.
Adjustments to Financial Statements: Removal of Deferred Taxes
Mastercard Inc., adjustments to financial statements
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Assets
- The reported total assets show a consistent upward trend from 24,860 million US dollars at the end of 2018 to 38,724 million US dollars by the end of 2022. Adjusted total assets follow a similar pattern, increasing steadily from 24,290 million to 37,573 million US dollars over the same period. The slight difference between reported and adjusted figures remains relatively constant, indicating minor adjustments related to deferred income taxes or other accounting treatments.
- Liabilities
- Reported total liabilities have increased from 19,371 million US dollars in 2018 to 32,347 million US dollars in 2022, showing steady growth each year. Adjusted total liabilities reflect a nearly identical upward trend, moving from 19,304 million to 31,954 million US dollars. The close correlation between reported and adjusted liabilities suggests that the adjustments have minimal impact on the overall liability figures.
- Stockholders’ Equity
- The reported stockholders’ equity rose from 5,395 million US dollars in 2018 to a peak of 7,312 million in 2021 before declining to 6,298 million in 2022. Adjusted stockholders’ equity follows a similar trajectory, increasing from 4,892 million in 2018 to 7,221 million in 2021 and then decreasing to 5,540 million in 2022. The equity decrease in 2022 after years of growth may suggest significant changes such as share repurchases, dividend payments, or other equity-related transactions affecting shareholders' funds.
- Net Income
- Reported net income displays an overall increasing trend from 5,859 million US dollars in 2018 to 9,930 million in 2022, with a noticeable dip in 2020 at 6,411 million, possibly reflecting external economic challenges during that year. Adjusted net income mirrors this pattern closely, decreasing slightly less in 2020 and rising steadily afterwards to 9,279 million in 2022. The gap between reported and adjusted net income is relatively small, indicating that adjustments for deferred income taxes or other factors slightly lower the reported figures but do not change overall trends.
- Overall Observations
- The financial data reveal a company experiencing steady growth in assets and liabilities over the analyzed period, with net income recovering after a dip in 2020 and reaching new highs by 2022. The fluctuations in stockholders' equity in the last year point to possible strategic financial activities impacting shareholder value. The consistency between reported and adjusted figures indicates that deferred income tax adjustments have modest effects on the reported financial position and performance, primarily refining rather than altering the fundamental trends.
Mastercard Inc., Financial Data: Reported vs. Adjusted
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Mastercard Inc., adjusted financial ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of the financial metrics over the five-year period reveals several notable trends and variations in the company's profitability, efficiency, leverage, and returns.
- Net Profit Margin
- Both reported and adjusted net profit margins exhibit fluctuations across the years. The reported net profit margin increased significantly from 39.19% in 2018 to 48.08% in 2019, then declined to 41.9% in 2020, recovered to 46.0% in 2021, and slightly decreased to 44.66% in 2022. Adjusted margins show a similar pattern, with a peak in 2019 followed by a decline, indicating that adjustments for deferred income tax have a moderate impact on the margin values but do not change the overall trend.
- Total Asset Turnover
- The reported total asset turnover ratio declined from 0.60 in 2018 to a low of 0.46 in 2020, suggesting reduced efficiency in asset utilization during this period. It slightly recovered to 0.50 in 2021 and further to 0.57 in 2022. Adjusted ratios follow a nearly identical trajectory, remaining marginally higher than the reported figures in the majority of the periods, indicating minor accounting adjustments affecting asset turnover.
- Financial Leverage
- The financial leverage ratios have shown a consistent upward trend over the period. The reported leverage increased from 4.61 in 2018 to 6.15 in 2022, while the adjusted leverage rose from 4.97 to 6.78 over the same timeframe. This increase implies a growing reliance on debt or other liabilities, with adjusted figures suggesting the leverage is somewhat higher after accounting for deferred taxes.
- Return on Equity (ROE)
- ROE shows high volatility but a general upward trend. Reported ROE rose from 108.6% in 2018 to a peak of 137.76% in 2019, then dropped to 100.31% in 2020 before climbing again to 118.8% in 2021 and reaching 157.67% in 2022. The adjusted ROE follows a similar pattern but is consistently higher than the reported values, especially in later years, suggesting that adjustments improve the perceived profitability from shareholders’ perspectives.
- Return on Assets (ROA)
- ROA decreased notably in 2020 to its lowest point (reported 19.09%, adjusted 19.59%) from higher values in previous years but improved steadily in subsequent years, reaching 25.64% (reported) and 24.7% (adjusted) by 2022. The adjusted ROA was generally slightly above the reported ROA, indicating that the tax adjustments have a marginal positive effect on overall asset profitability.
In summary, the company has experienced strong profitability metrics with some fluctuations, notably a dip in 2020 likely linked to external or operational challenges. Asset turnover efficiencies declined and then improved toward the end of the period. The increasingly higher financial leverage points to greater use of debt or financial obligations, potentially enhancing returns but also increasing financial risk. Returns on equity and assets show resilience and a growth trajectory, with adjustments for deferred taxes consistently yielding more favorable measures of profitability. These data trends highlight an overall strong financial performance with evolving capital structure and operational efficiency.
Mastercard Inc., Financial Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Net profit margin = 100 × Net income ÷ Net revenue
= 100 × 9,930 ÷ 22,237 = 44.66%
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Net revenue
= 100 × 9,279 ÷ 22,237 = 41.73%
The financial data reveals notable trends over the five-year period from 2018 to 2022. Both reported and adjusted net income figures exhibit an overall upward trajectory, with some fluctuations in the interim years.
- Net Income
- Reported net income increased from $5,859 million in 2018 to $9,930 million in 2022, representing significant growth. A peak is observed in 2019 at $8,118 million, followed by a dip in 2020 to $6,411 million, before recovering and surpassing previous levels in subsequent years. Adjusted net income mirrors this trend, beginning at $5,615 million in 2018 and rising to $9,279 million in 2022, with a similar drop in 2020.
- Net Profit Margins
- Reported net profit margin shows fluctuations, starting at 39.19% in 2018, peaking at 48.08% in 2019, dipping to 41.9% in 2020, then increasing again to 46.0% in 2021, before a slight decline to 44.66% in 2022. Adjusted net profit margin follows a comparable pattern, starting at 37.56% in 2018, remaining steady near 48% in 2019, decreasing to 42.38% in 2020, increasing again to 45.63% in 2021, and falling to 41.73% in 2022.
- Insights
- The pronounced dip in both income and profit margins in 2020 corresponds with a challenging operational year, potentially impacted by external factors. The recovery in 2021 and further growth into 2022 indicate resilience and improved profitability. The adjusted figures, reflecting income excluding deferred tax items, closely align with reported results, suggesting limited distortion from tax adjustments over the observed period.
Adjusted Total Asset Turnover
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Total asset turnover = Net revenue ÷ Total assets
= 22,237 ÷ 38,724 = 0.57
2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= 22,237 ÷ 37,573 = 0.59
The financial data reveals several key trends regarding the reported and adjusted total assets as well as their corresponding turnover ratios over the five-year period ending December 31, 2022.
- Reported total assets
- The reported total assets exhibited a consistent upward trajectory, increasing from $24,860 million at the end of 2018 to $38,724 million by the end of 2022. This represents a growth of approximately 56% over the period. Notably, the most significant annual increases occurred between 2018–2019 and 2020–2021.
- Adjusted total assets
- The adjusted total assets follow a similar increasing trend, moving from $24,290 million in 2018 to $37,573 million in 2022. The adjustment reduces total assets slightly compared to the reported figures but maintains the same general growth pattern. The progression indicates steady asset base expansion with minor adjustments reflecting income tax considerations.
- Reported total asset turnover
- The reported total asset turnover ratio shows a declining trend from 0.60 in 2018 to a low of 0.46 in 2020, before recovering to 0.57 in 2022. This indicates that asset utilization efficiency decreased notably during 2019–2020 but improved in the two subsequent years, nearly reaching the initial 2018 level by 2022.
- Adjusted total asset turnover
- The adjusted turnover ratio portrays a similar trend, starting at 0.62 in 2018, decreasing to 0.46 in 2020, then increasing to 0.59 in 2022. The adjustment marginally increases turnover ratios compared to reported figures, suggesting that deferred income tax adjustments positively influence perceived asset efficiency.
Overall, the data reflects a growing asset base accompanied by fluctuating asset turnover ratios. The decline in turnover during 2020 may indicate reduced operational efficiency or changes in business dynamics during that period, with subsequent years showing recovery. Adjustments for deferred income taxes have a subtle impact, slightly elevating turnover ratios and moderately reducing asset base values, which highlights the importance of considering both reported and adjusted figures for a refined analysis of asset utilization.
Adjusted Financial Leverage
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Financial leverage = Total assets ÷ Total Mastercard Incorporated stockholders’ equity
= 38,724 ÷ 6,298 = 6.15
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Mastercard Incorporated stockholders’ equity
= 37,573 ÷ 5,540 = 6.78
The analysis of the financial data over the five-year period reveals several noteworthy trends and changes in the company's reported and adjusted financial metrics.
- Total Assets
- Both reported and adjusted total assets show a consistent upward trajectory from 2018 through 2021. Reported total assets increased from $24,860 million in 2018 to $37,669 million in 2021, while adjusted total assets rose from $24,290 million to $37,183 million during the same timeframe. However, in 2022, there is a notable slowdown with reported total assets growing marginally to $38,724 million, and adjusted total assets slightly decreasing to $37,573 million, indicating a plateauing or slight contraction in asset base.
- Stockholders’ Equity
- The reported stockholders’ equity demonstrates a steady rise from $5,395 million in 2018 to a peak of $7,312 million in 2021, followed by a significant decline to $6,298 million in 2022. Adjusted stockholders’ equity follows a similar pattern, increasing from $4,892 million in 2018 to $7,221 million in 2021 before falling sharply to $5,540 million in 2022. This decline in equity in 2022 suggests increased adjustments that negatively impacted the equity base, potentially reflecting changes in deferred tax liabilities or other accounting adjustments.
- Financial Leverage
- The reported financial leverage ratio rose from 4.61 in 2018 to 5.25 in 2020, indicating an increasing use of debt relative to equity. It slightly declined in 2021 to 5.15 but sharply increased to 6.15 in 2022. The adjusted financial leverage ratio closely parallels this trend but exhibits a higher level in most years, beginning at 4.97 in 2018, peaking at 5.53 in 2020, declining to 5.15 in 2021, and then surging to 6.78 in 2022. The elevated leverage in 2022, especially under adjusted figures, indicates a greater relative use of liabilities or reduced equity, which could raise concerns about financial risk and capital structure stability.
Overall, the data indicates progressive growth in assets and equity until 2021, followed by a marked slowdown or reversal in 2022. The increasing financial leverage, particularly in 2022, suggests a shift towards higher financial risk, which warrants closer monitoring. The adjusted figures generally paint a more conservative picture with higher leverage ratios and lower equity balances, emphasizing the impact of deferred income tax and other adjustments on the company's financial position.
Adjusted Return on Equity (ROE)
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 ROE = 100 × Net income ÷ Total Mastercard Incorporated stockholders’ equity
= 100 × 9,930 ÷ 6,298 = 157.67%
2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted total Mastercard Incorporated stockholders’ equity
= 100 × 9,279 ÷ 5,540 = 167.49%
The data reveals several notable trends regarding the company's financial performance and position over the five-year period ending in 2022.
- Net Income Trends
- Reported net income demonstrates a general upward trajectory, rising from $5,859 million in 2018 to $9,930 million in 2022, despite a fluctuation in 2020 when it dropped to $6,411 million from $8,118 million in 2019. Adjusted net income mirrors this pattern, starting at $5,615 million in 2018 and increasing to $9,279 million in 2022, with a similar dip during 2020 to $6,484 million. This suggests a recovery phase post-2020 with strong growth in subsequent years.
- Stockholders’ Equity Trends
- Reported stockholders’ equity exhibits steady growth from $5,395 million in 2018 to a peak of $7,312 million in 2021, followed by a decline to $6,298 million in 2022. Adjusted stockholders’ equity follows a comparable pattern but consistently reports lower values than the reported figures, ending at $5,540 million in 2022 after peaking at $7,221 million in 2021. The decline in equity in 2022 may reflect increased distributions or other equity adjustments.
- Return on Equity (ROE) Trends
- Reported ROE values show a high level of profitability relative to equity, starting at 108.6% in 2018 and experiencing fluctuations with a dip to 100.31% in 2020, followed by a significant increase to 157.67% in 2022. Adjusted ROE figures are consistently higher than reported ROE across all years, indicating that adjustments generally enhance the return metric. Adjusted ROE grew from 114.78% in 2018 to 167.49% in 2022, reflecting improved efficiency and profitability on an adjusted basis.
- Comparative Insights
- The adjusted figures for both net income and stockholders’ equity are slightly lower than the reported values, but their corresponding adjusted ROE ratios are higher. This pattern implies that the adjustments, potentially related to deferred tax considerations, reduce equity or income values but increase the calculated efficiency of equity use. The divergence between reported and adjusted values grows somewhat over time, highlighting the increasing importance of these adjustments in financial analysis.
Overall, the company's profitability has generally increased across the analyzed period, particularly evident in the robust ROE figures. The temporary setback in net income and ROE in 2020 suggests vulnerability possibly related to economic or operational disruptions during that year. The decline in equity in 2022 juxtaposed with rising net income and ROE suggests a strategy that might include payout increases or capital restructuring. The adjusted metrics provide an enhanced view of efficiency, underscoring the impact of tax-related adjustments on financial results.
Adjusted Return on Assets (ROA)
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × 9,930 ÷ 38,724 = 25.64%
2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × 9,279 ÷ 37,573 = 24.70%
The analysis of the financial data reveals several notable trends over the five-year period ending in 2022.
- Net Income
- Reported net income demonstrated a general upward trajectory, increasing from 5,859 million US dollars in 2018 to 9,930 million US dollars in 2022. There was a significant rise between 2018 and 2019, followed by a decline in 2020, and then a recovery and further growth in 2021 and 2022.
- Adjusted net income followed a similar pattern, with values closely mirroring the reported figures. Adjusted net income increased from 5,615 million US dollars in 2018 to 9,279 million US dollars in 2022, showing the same dip in 2020 and subsequent recovery.
- Total Assets
- Reported total assets showed consistent growth throughout the period. The amount rose from 24,860 million US dollars in 2018 to 38,724 million US dollars in 2022. The increase in assets was steady year over year, although the growth rate slowed slightly in 2022 compared to previous years.
- Adjusted total assets also increased from 24,290 million US dollars in 2018 to 37,573 million US dollars in 2022. Adjusted figures remained consistently slightly lower than reported totals but exhibited a comparable upward trend.
- Return on Assets (ROA)
- Reported ROA exhibited fluctuations, reaching a peak of 27.77% in 2019 before decreasing notably to 19.09% in 2020. The ROA then improved to 23.06% in 2021 and further increased to 25.64% in 2022, although not returning to the 2019 peak level.
- Adjusted ROA closely tracked the reported values, peaking slightly higher at 28.27% in 2019 and following the same trough in 2020 at 19.59%. Subsequent recovery was observed with adjusted ROA rising to 24.7% in 2022.
Overall, the data indicates strong growth in profitability and asset base over the five-year period, with a notable contraction in 2020 that likely reflects external economic disruptions. The recovery post-2020 is evident in improved net income and ROA metrics, suggesting effective management of resources and resumed earnings growth. The close alignment between reported and adjusted figures implies that deferred income tax adjustments have a moderate and consistent impact on the financial results without significantly altering the overall trends.