McDonald’s Corp. (NYSE:MCD)

The analysis of the current and deferred income tax expenses over the five-year period reveals distinct trends and fluctuations in the provision amounts.

Current Tax Provision

The current tax provision shows an overall upward trend from 2020 through 2023, rising from $1,404 million to a peak of $2,740 million. In 2024, this amount slightly decreases to $2,695 million, remaining close to the previous year’s high level. This pattern indicates increasing taxable income or changes in tax regulations affecting current tax liabilities over the reviewed period, with a brief stabilization in the final year.

Deferred Tax Provision (Benefit)

Deferred tax provisions fluctuate significantly and display a consistent benefit (negative values) from 2021 onward. After a marginal positive provision of $6 million in 2020, the amount shifts to substantial deferred tax benefits: -$428 million in 2021, -$346 million in 2022, further increasing to -$686 million in 2023, and slightly reducing in magnitude to -$574 million in 2024. The persistent negative values suggest ongoing recognition of deferred tax assets or favorable timing differences reducing the overall tax expense in these years.

Provision for Income Taxes

The total provision for income taxes, which includes both current and deferred tax components, reflects an upward movement overall. Starting at $1,410 million in 2020, it dips in 2021 to $1,583 million, then gradually increases each year, reaching $2,121 million by 2024. The growth in total tax provision is somewhat moderated by the deferred tax benefits, as the increase in current taxes is partly offset by deferred tax provisions.

In summary, the data depict growing current income tax expenses accompanied by consistent deferred tax benefits that reduce the total income tax provision. While the current tax provision rises steadily over the period, the deferred tax benefit increases significantly after 2020, maximizing in 2023 and slightly lessening in 2024. The overall effect yields a total income tax provision that, while increasing, grows at a moderated pace due to the interplay between current and deferred tax elements.

Statutory U.S. federal income tax rate

The statutory federal income tax rate remained stable at 21% throughout the analyzed period from 2020 to 2024, indicating no change in the fundamental tax legislation affecting the income.

State income taxes, net of related federal income tax benefit

State income taxes showed minor fluctuations, starting at 1.8% in 2020, slightly increasing to 2% in 2022, then returning to nearly the original level (1.9%) by 2024. This suggests relatively consistent state tax impacts with modest variation.

Foreign income taxed at different rates

There is a clear upward trend in foreign income taxed at varying rates, rising from 0.4% in 2020 to 2.4% in 2024. This increase may reflect a growing proportion of earnings from foreign jurisdictions with different tax treatments or changing tax regulations internationally.

Tax impact of intercompany transactions

The tax impact of intercompany transactions decreased significantly over the period, moving from a positive 2.1% in 2020 to a negative impact of -1.1% in 2024. This downturn indicates a shift that likely reduces the overall tax burden due to these internal transactions.

Global intangible low-tax income (GILTI)

GILTI contributions to the tax rate decreased sharply from 1.2% in 2020 to 0.3% in 2021, then stabilized around 0.4-0.5% through 2024, implying a dampening effect of such low-tax income on tax expenses after an initial adjustment period.

Foreign-derived intangible income (FDII)

FDII maintained a consistently negative effect on the tax rate, fluctuating between -2.6% and -4.2%, with the largest negative impact in 2022 (-4.2%). This negative percentage reflects tax benefits or credits related to foreign-derived intangible income.

U.S./Foreign tax law changes

This item shows negative contributions in 2020 and 2021 (-1.8% and -3.9%, respectively) but lacks data for subsequent years, suggesting significant tax law impacts during the early period that may have been resolved or stabilized afterward.

Nonoperating expense related to France audit settlement

A one-time nonoperating expense related to a France audit settlement is evident only in 2022 (1.4%), indicating an unusual charge affecting tax expenses in that year.

Other, net

The net other category shows varying impacts, starting positively in 2020 (1.7%), turning negative in subsequent years with the lowest point in 2023 (-2.3%), and slightly recovering in 2024 (-0.8%), reflecting miscellaneous tax-related adjustments or anomalies over time.

Effective income tax rates

The effective income tax rate experienced notable variation, declining sharply from 23% in 2020 to 17.3% in 2021, rising back to 21.1% in 2022, then slightly decreasing and stabilizing around 19.5% to 20.5% in 2023 and 2024. This pattern indicates fluctuations driven by tax law changes, foreign income effects, and nonoperating items, ultimately showing moderate volatility with a tendency towards a lower effective rate compared to the statutory rate.

Lease Liability

The lease liability exhibited a relatively stable trend, initially increasing slightly from 3,462 million US$ in 2020 to 3,517 million US$ in 2021, followed by a decrease to 3,100 million US$ in 2022. Subsequently, it rose again to 3,384 million US$ in 2023 before falling to 3,292 million US$ in 2024, indicating fluctuations but generally maintaining within a narrow range over the five-year period.

Intangible Assets

Intangible assets showed a consistent upward trajectory throughout the period, rising from 2,096 million US$ in 2020 to 3,495 million US$ in 2024. This steady increase suggests ongoing investment or capitalisation in intangible resources, potentially reflecting brand value, trademarks, or other non-physical assets growing in importance.

Property and Equipment (Assets)

Property and equipment asset values increased modestly from 594 million US$ in 2020 to a peak of 676 million US$ in 2022, followed by a decline to 469 million US$ in 2024. This pattern could reflect divestitures, asset impairments, or the ageing and reduction of physical assets in recent years.

Deferred Foreign Tax Credits

There was a notable decline in deferred foreign tax credits, dropping from 289 million US$ in 2020 to just 50 million US$ in 2024, with sharp decreases seen particularly between 2021 and 2022. This decline might indicate changes in international tax obligations or restructuring of tax strategies abroad.

Employee Benefit Plans

Employee benefit plan obligations fluctuated over the period, decreasing from 191 million US$ in 2020 to 154 million US$ in 2021, then rising back to 192 million US$ in 2023 before lowering again to 168 million US$ in 2024. This volatility may be linked to changes in actuarial assumptions, employee numbers, or benefit program adjustments.

Deferred Revenue

Deferred revenue experienced a moderate decline from 155 million US$ in 2020 to 113 million US$ in 2024, with interim fluctuations. This pattern could imply changing customer prepayments or advances received for goods and services yet to be delivered.

Operating Loss Carryforwards

The value of operating loss carryforwards showed significant variation, starting at 87 million US$ in 2020, dipping slightly, then rising sharply to 267 million US$ in 2023 before falling to 195 million US$ in 2024. Such movements may be indicative of observed losses eligible for tax relief purposes fluctuating year to year.

Other Deferred Tax Assets

Other components classified under deferred tax assets decreased from 449 million US$ in 2020 to 169 million US$ in 2024, reflecting a downward trend in miscellaneous deferred tax benefits.

Deferred Tax Assets Before Valuation Allowance

Deferred tax assets before valuation allowance generally increased from 7,322 million US$ in 2020 to a peak of 8,032 million US$ in 2023, then slightly decreased to 7,951 million US$ in 2024, suggesting growth in recognized temporary differences but some stabilization towards the end of the period.

Valuation Allowance

The valuation allowance increased negatively from -816 million US$ in 2020 to a peak of -1,150 million US$ in 2023, indicating a growing reserve against deferred tax assets that are unlikely to be realized, before improving to -917 million US$ in 2024.

Net Deferred Tax Assets

Net deferred tax assets demonstrated generally positive values, increasing from 6,506 million US$ in 2020 to 7,034 million US$ in 2024 with fluctuations responding mainly to changes in valuation allowance.

Lease Right-of-Use Asset

The lease right-of-use asset showed a decreasing trend in negative values, moving from -3,427 million US$ in 2020 to -3,213 million US$ in 2024, reflecting changes in right-of-use assets associated with lease liabilities.

Property and Equipment (Liabilities)

Liabilities related to property and equipment followed a steady downward pattern in negative values from -1,600 million US$ to -1,568 million US$, suggesting gradual reduction or amortization of associated liabilities.

Intangible Liabilities

Intangible liabilities decreased markedly from -1,046 million US$ in 2020 to -187 million US$ in 2024, indicating a reduction in obligations linked to intangible assets, possibly through amortization or settlements.

Other Deferred Tax Liabilities

Other deferred tax liabilities fluctuated, decreasing from -322 million US$ to -437 million US$ at the end of the period, with notable volatility in intermediate years, indicating some variability in miscellaneous deferred obligations.

Deferred Tax Liabilities

Total deferred tax liabilities decreased steadily from -6,396 million US$ in 2020 to -5,405 million US$ in 2024, reflecting a reduction in deferred tax obligations over time.

Net Deferred Tax Assets (Liabilities)

The net deferred tax asset position improved significantly from 110 million US$ in 2020 to 1,629 million US$ in 2024, highlighting an enhanced net asset status in deferred taxes and reflecting the combined positive movements in deferred tax assets and liabilities.

The financial data reveals notable trends in the deferred tax assets and liabilities over the five-year period from 2020 to 2024.

Deferred Tax Assets

There is a consistent upward trajectory in deferred tax assets, rising from $2,136 million in 2020 to $3,543 million in 2024. This represents an overall increase of approximately 66%. The growth appears steady year-over-year, with the largest annual increment occurring between 2022 and 2023 (an increase of $546 million), followed by a substantial rise from 2023 to 2024 ($520 million). This trend may suggest an increase in deductible temporary differences or other factors contributing to higher deferred tax asset recognition.

Deferred Tax Liabilities

The deferred tax liabilities exhibit a more volatile pattern. Starting at $2,026 million in 2020, they increment slightly to $2,076 million in 2021, then decrease to $1,998 million in 2022 and further drop to $1,681 million in 2023. In 2024, there is a reversal with an increase to $1,914 million. Overall, the liability decreased by about 5.5% from 2020 to 2024, despite the uptick in the final year. The significant reduction between 2021 and 2023 suggests a possible decline in taxable temporary differences or effective tax planning strategies.

Comparative Insights

Throughout the period, deferred tax assets consistently exceed deferred tax liabilities by an expanding margin. The gap between assets and liabilities widened from $110 million in 2020 to $1,629 million in 2024. This growing surplus of deferred tax assets over liabilities could indicate future tax benefits expected to be realized. Such a pattern might reflect strategic financial management of tax positions, but could also warrant scrutiny regarding the realizability of these deferred tax assets.

Assets

The reported total assets display fluctuations over the given period, decreasing from 52,627 million USD in 2020 to 50,436 million USD in 2022, followed by an increase to 56,147 million USD in 2023, and then a slight decline to 55,182 million USD in 2024. The adjusted total assets follow a similar pattern but at consistently lower values, decreasing from 50,491 million USD in 2020 to 47,959 million USD in 2022, then increasing to 53,124 million USD in 2023 and falling slightly to 51,639 million USD in 2024. This suggests some recurring adjustments related to deferred taxes or other factors have a persistent impact on asset valuation.

Liabilities

The reported total liabilities steadily decrease from 60,452 million USD in 2020 to 56,439 million USD in 2022, before rising again to 60,854 million USD in 2023 and then falling to 58,980 million USD in 2024. Adjusted total liabilities mirror this trend but remain consistently lower by a narrow margin, declining from 58,426 million USD in 2020 to 54,442 million USD in 2022, then increasing to 59,173 million USD in 2023, then falling to 57,066 million USD in 2024. This indicates that adjusted liabilities take into account similar factors as for assets, with timing or recognition differences impacting reported values.

Shareholders’ Equity (Deficit)

Reported shareholders’ equity is negative throughout the period, indicating a deficit. It improves from -7,825 million USD in 2020 to -4,601 million USD in 2021, worsening to -6,003 million USD in 2022, before improving again to -4,707 million USD in 2023 and further to -3,797 million USD in 2024. Adjusted shareholders’ equity follows this general pattern but reflects slightly larger deficits consistently across all periods, worsening notably in 2022 and improving more moderately by 2024. This persistent negative equity suggests ongoing financial challenges despite fluctuations.

Net Income

The reported net income increases from 4,731 million USD in 2020 to a peak of 8,469 million USD in 2023, followed by a slight decrease to 8,223 million USD in 2024. Adjusted net income values show a similar pattern but are consistently below reported figures, with 4,737 million USD in 2020 rising to 7,782 million USD in 2023 and slightly declining to 7,649 million USD in 2024. The divergence between reported and adjusted net income suggests that deferred tax adjustments or similar items moderately affect profitability metrics, but the general trend indicates overall growth in net income until 2023, with stabilization or slight contraction in 2024.

Net Profit Margin

The reported net profit margin exhibited volatility over the observed period, increasing from 24.63% in 2020 to a peak of 33.22% in 2023, followed by a slight decline to 31.72% in 2024. The adjusted net profit margin demonstrates a similar pattern but consistently registers lower values than the reported figures. It rose from 24.66% in 2020 to 30.53% in 2023 and then decreased to 29.51% in 2024. The adjustments for deferred income tax led to a noticeable reduction in margins, suggesting that tax effects temporarily enhanced the reported profitability metrics.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios increased steadily throughout the period. The reported ratio grew from 0.36 in 2020 to 0.47 in 2024, while the adjusted ratio showed a similar upward trend from 0.38 to 0.50. The adjusted ratios are marginally higher than the reported ones, indicating that asset utilization efficiency improves slightly when accounting for deferred tax adjustments. This overall growth reflects enhanced effectiveness in generating revenue from the asset base.

Return on Assets (ROA)

The reported ROA increased notably from 8.99% in 2020 to 15.08% in 2023, then slightly decreased to 14.90% in 2024. Adjusted ROA maintained a similar trajectory but remained marginally below the reported values initially, starting at 9.38% in 2020 and ending at 14.81% in 2024. The narrowing gap over time suggests diminishing impact of deferred tax effects on asset profitability. The data indicates improved asset efficiency and profitability over the analyzed years, particularly evident in the almost 5 percentage point rise from 2020 to 2023.

Unavailable Data

Financial leverage, both reported and adjusted, as well as return on equity (ROE) metrics, are not provided for any of the years. The absence of these indicators limits comprehensive analysis on capital structure impact and equity profitability dynamics.

Reported Net Income

The reported net income displayed an overall increasing trend from 2020 through 2023, rising from 4,731 million US dollars to a peak of 8,469 million US dollars in 2023. However, there was a slight decline observed in 2024, with reported net income decreasing to 8,223 million US dollars.

Adjusted Net Income

Adjusted net income demonstrated a similar upward trajectory until 2023, increasing from 4,737 million US dollars in 2020 to 7,782 million US dollars in 2023. Nonetheless, the adjusted net income figures showed lower growth compared to the reported net income. There was a reduction in 2024 as well, falling to 7,649 million US dollars, consistent with the trend observed in the reported net income.

Reported Net Profit Margin

The reported net profit margin exhibited a fluctuating pattern. Starting at 24.63% in 2020, it rose significantly to 32.49% in 2021, followed by a decrease to 26.65% in 2022. In 2023, the margin increased again to 33.22%, reaching the highest point in the considered period, before modestly falling to 31.72% in 2024.

Adjusted Net Profit Margin

The adjusted net profit margin also fluctuated but consistently remained below the reported net profit margin. From 24.66% in 2020, it increased to 30.65% in 2021, then declined to 25.16% in 2022. It rose again to 30.53% in 2023 followed by a decrease to 29.51% in 2024. This pattern reflects a similar cyclical trend with lower margins compared to the reported figures.

Comparative Insights

Both the net income and profit margin metrics reflect a general growth trend that peaked in 2023 followed by a slight downturn in 2024. Adjusted figures, accounting for deferred income tax adjustments, consistently show lower values than reported figures, suggesting the impact of tax adjustments on the reported earnings. The fluctuations in profit margins over the years indicate variability in profitability efficiency which could be influenced by operational or tax-related factors.

Total Assets

Reported total assets exhibited moderate fluctuation over the five-year period. Starting at $52,627 million in 2020, assets increased slightly to $53,854 million in 2021, then declined to $50,436 million in 2022. A marked recovery occurred in 2023 with total assets rising to $56,147 million, followed by a slight decrease to $55,182 million in 2024.

Adjusted total assets followed a similar pattern but consistently remained lower than reported values, indicating adjustments primarily reduced reported asset valuations. The adjusted figures started at $50,491 million in 2020, declined steadily to $47,959 million in 2022, then rebounded to $53,124 million in 2023 before a minor contraction to $51,639 million in 2024.

Total Asset Turnover

Reported total asset turnover showed an overall improving trend, increasing from 0.36 in 2020 to 0.47 in 2024. This progression indicates enhanced efficiency in generating revenue from assets over time, despite a slight dip from 0.46 in 2022 to 0.45 in 2023 before recovering again.

Adjusted total asset turnover consistently exceeded reported turnover across all years, implying that when adjusting for income tax effects, the firm demonstrated even greater asset utilization efficiency. Adjusted turnover increased from 0.38 in 2020 to 0.50 in 2024, with steady improvements each year and minor stabilization between 2022 and 2023.

Insights

The divergence between reported and adjusted figures suggests that deferred and annual income tax adjustments materially impact the asset base valuation and performance ratios. The lower adjusted asset values combined with higher turnover ratios imply improved operational efficiency when accounting for tax effects.

The recovery in asset levels in 2023 after a decline in 2022, coupled with the steady improvement in turnover, indicates potential strategic initiatives or asset management optimizations that enhanced productive use of assets despite fluctuations in gross asset values.

The data reveals several notable trends in the adjusted financial position over the five-year period ending in 2024. Total assets, both reported and adjusted, exhibit fluctuations rather than steady growth or decline. Reported total assets peaked in 2023 at 56,147 million US dollars, following a decrease in 2022, and slightly declined in 2024 to 55,182 million. The adjusted total assets follow a similar pattern, with values decreasing to a low in 2022 before rebounding in 2023 and then moderately declining again in 2024.

Shareholders’ equity presents a consistently negative position across all years and both reported and adjusted values, indicating a deficit situation. Although negative, the reported shareholders’ equity showed some improvement in 2024 with the least negative figure of -3,797 million, improving from -7,825 million in 2020. However, this improvement is irregular as the equity worsened in some years, notably in 2022 before improving again afterward. Similarly, adjusted shareholders’ equity mirrors this volatility with an overall negative trend but a less pronounced deficit in the most recent year as compared to 2020.

The absence of reported and adjusted financial leverage ratios for all years limits the ability to analyze capital structure risk directly. Nevertheless, the negative equity values suggest that the company might have significant liabilities exceeding its equity, impacting financial leverage indirectly. The fluctuations in total assets alongside persistent negative equity highlight ongoing challenges in maintaining positive net asset value, despite the asset base recovering somewhat after a dip in 2022.

Overall, the data points to a company managing fluctuating asset levels and persistent equity deficits, with a slight improvement in the negative equity position in the latest year. This suggests efforts toward financial stabilization, though inherent risks related to the negative equity and missing leverage data remain areas for further attention.

The financial data reveals notable movements in both income and shareholders’ equity over the five-year span. Net income, both reported and adjusted, demonstrates variability but generally maintains an upward trajectory until 2023, followed by a slight decline in the final year.

Reported Net Income

This metric increased significantly from 4,731 million US$ in 2020 to a peak of 8,469 million US$ in 2023, representing strong growth. However, there was a minor decrease in 2024 to 8,223 million US$, indicating a slight reversal in earnings momentum.

Adjusted Net Income

Adjusted figures, which account for deferred income tax impacts, also follow a similar growth pattern, rising from 4,737 million US$ in 2020 to 7,782 million US$ in 2023 before declining marginally to 7,649 million US$ in 2024. The adjustment dampens the peak earnings somewhat compared to reported net income, suggesting the presence of deferred tax adjustments impacting the net profitability.

Reported Shareholders’ Equity (Deficit)

The reported shareholders’ equity shows a persistent negative balance throughout the period, indicating a deficit. The deficit improved from -7,825 million US$ in 2020 to -3,797 million US$ in 2024, signifying a gradual reduction in net liabilities or negative equity over time.

Adjusted Shareholders’ Equity (Deficit)

The adjusted equity figures, accounting for tax adjustments, depict a consistently larger deficit compared to reported values. Beginning at -7,935 million US$ in 2020, the deficit fluctuated but generally worsened until 2023 (-6,049 million US$), followed by a slight improvement in 2024 (-5,426 million US$). This divergence from reported figures suggests the deferred tax adjustments have a significant impact on the equity position, exacerbating the deficit.

The absence of reported or adjusted return on equity (ROE) percentages limits direct assessment of profitability relative to equity. Nevertheless, the persistent equity deficits combined with sustained net income earnings imply the company may be operating with financial leverage or other structural considerations affecting equity despite profitable operations.

Overall, the trends demonstrate that while net income exhibited growth followed by stabilization, shareholders’ equity deficits have remained a challenge, although there are signs of modest improvement by 2024. The deferred income tax adjustments influence both net income and equity figures, highlighting the importance of tax-related factors in understanding the company’s financial condition.

Net Income Trends

The reported net income shows a general upward trend from 2020 to 2023, increasing from $4,731 million to $8,469 million, followed by a slight decrease to $8,223 million in 2024. The adjusted net income follows a similar pattern, rising from $4,737 million in 2020 to a peak of $7,782 million in 2023, then slightly declining to $7,649 million in 2024. This indicates consistent profitability growth over the years, with a marginal decline in the most recent year after 2023.

Total Assets Trends

Reported total assets show fluctuations over the analyzed period. Initially, there is a moderate increase from $52,627 million in 2020 to $53,854 million in 2021, but then a notable decline to $50,436 million in 2022. Following that, reported assets rise sharply to $56,147 million in 2023 before a slight decrease to $55,182 million in 2024. Adjusted total assets follow a parallel pattern, starting lower than reported figures and showing declines in 2022 and after 2023, with some recovery in 2023 before a reduction in 2024. Overall, asset levels exhibit volatility rather than sustained growth.

Return on Assets (ROA) Trends

Reported ROA percentage increases notably from 8.99% in 2020 to a peak of 15.08% in 2023, followed by a slight decrease to 14.9% in 2024. Adjusted ROA percentages demonstrate a similar trend, increasing from 9.38% in 2020 to 14.65% in 2023 and marginally rising further to 14.81% in 2024, indicating strong operational efficiency and profitability relative to asset base over time. The adjusted ROA consistently remains close to the reported ROA, suggesting adjustments do not drastically alter the profitability ratios.

Insights and Summary

The data reflects strong financial performance trends with net income growth and high asset utilization as shown by rising ROA values. Despite asset base fluctuations, profitability has generally improved, indicating effective management of resources and earnings. The minor differences between reported and adjusted figures suggest that the adjustments for deferred income taxes have a modest impact on the company's financial performance metrics. The slight decline in income and assets in 2024 warrants monitoring but does not significantly alter the overall positive trend observed in previous years.