Accounting Policy on 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 Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Deferred income tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities and are measured using the enacted income tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax benefits generally represent the change in net deferred income tax assets and liabilities in the year. Other amounts result from adjustments related to acquisitions and foreign currency as appropriate.

Stryker operates in multiple income tax jurisdictions both within the United States and internationally. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions based on current interpretations of complex income tax regulations. Income tax authorities in these jurisdictions regularly perform audits of Stryker’s income tax filings. Income tax audits associated with the allocation of this income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments if changes to the income allocation are required between jurisdictions with different income tax rates.

Source: 10-K (filing date: 2019-02-07).

Stryker Corp., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended	Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	United States federal
	United States state and local
	International
	Current income tax expense
	United States federal
	United States state and local
	International
	Deferred income tax expense (benefit)
	Income tax expense (benefit)

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Item	Description	The company
Current income tax expense	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Stryker Corp.’s current income tax expense increased from 2016 to 2017 but then slightly decreased from 2017 to 2018 not reaching 2016 level.
Deferred income tax expense (benefit)	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Stryker Corp.’s deferred income tax expense (benefit) increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.
Income tax expense (benefit)	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Stryker Corp.’s income tax expense (benefit) increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.

Stryker Corp., effective income tax rate (EITR) reconciliation

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	United States federal statutory tax rate
	United States state and local income taxes, less federal deduction
	Foreign income tax at rates other than 21%
	Tax related to repatriation of foreign earnings
	Other
	Effective income tax rate, before Tax Cuts and Jobs Act of 2017 and intellectual property transfer
	Tax Cuts and Jobs Act of 2017 transition tax
	Tax Cuts and Jobs Act of 2017 deferred tax changes
	Intellectual property transfer
	Effective income tax rate

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Item	Description	The company
Effective income tax rate, before Tax Cuts and Jobs Act of 2017 and intellectual property transfer	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Stryker Corp.’s effective income tax rate, before Tax Cuts and Jobs Act of 2017 and intellectual property transfer decreased from 2016 to 2017 but then slightly increased from 2017 to 2018.

Stryker Corp., 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
	Inventories
	Product-related liabilities
	Other accrued expenses
	Depreciation and amortization
	State income taxes
	Share-based compensation
	Net operating loss carryforwards
	Other
	Deferred income tax assets
	Valuation allowances
	Net deferred income tax assets
	Depreciation and amortization
	Undistributed earnings
	Other
	Deferred income tax liabilities
	Net deferred income tax assets (liabilities)

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Item	Description	The company
Deferred income tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Stryker Corp.’s deferred income tax assets decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Net deferred income tax assets	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Stryker Corp.’s net deferred income tax assets decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Net deferred income tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Stryker Corp.’s net deferred income tax assets (liabilities) decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Stryker Corp., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Current deferred income tax assets
	Noncurrent deferred income tax assets
	Current deferred income tax liabilities (included in Accrued expenses and other liabilities)
	Noncurrent deferred income tax liabilities (included in Other noncurrent liabilities)

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Item	Description	The company
Noncurrent deferred income tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Stryker Corp.’s noncurrent deferred income tax assets decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Noncurrent deferred income tax liabilities (included in Other noncurrent liabilities)	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Stryker Corp.’s noncurrent deferred income tax liabilities (included in Other noncurrent liabilities) decreased from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Stryker Corp., 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)
	Less: Current deferred tax assets, net
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Current deferred tax assets, net
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Current Liabilities
	Current liabilities (as reported)
	Less: Current deferred tax liabilities, net
	Current liabilities (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Current deferred tax liabilities, net
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Total Stryker Shareholders’ Equity
	Total Stryker shareholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Total Stryker shareholders’ equity (adjusted)
	Adjustment to Net Earnings
	Net earnings (as reported)
	Add: Deferred income tax expense (benefit)
	Net earnings (adjusted)

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Stryker Corp., Financial Data: Reported vs. Adjusted

Stryker Corp., adjusted financial ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Current Ratio
	Reported current ratio
	Adjusted current ratio
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

Financial ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Stryker Corp.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Stryker Corp.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Stryker Corp.’s adjusted total asset turnover ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Stryker Corp.’s adjusted financial leverage ratio increased from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Stryker Corp.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Stryker Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Stryker Corp., Financial Ratios: Reported vs. Adjusted

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Current assets
	Current liabilities
	Liquidity Ratio
	Current ratio¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted current assets
	Adjusted current liabilities
	Liquidity Ratio
	Adjusted current ratio²

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

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

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

Liquidity ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Stryker Corp.’s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings
	Net sales
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings
	Net sales
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Net profit margin = 100 × Net earnings ÷ Net sales
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Stryker Corp.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

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

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ Financial leverage = Total assets ÷ Total Stryker shareholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Stryker shareholders’ equity
= hidden ÷ hidden = hidden

Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Stryker Corp.’s adjusted financial leverage ratio increased from 2016 to 2017 and from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings
	Total Stryker shareholders’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings
	Adjusted total Stryker shareholders’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ ROE = 100 × Net earnings ÷ Total Stryker shareholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted total Stryker shareholders’ equity
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Stryker Corp.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

¹ ROA = 100 × Net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Stryker Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

	Stryker Corp.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

Stryker Corp. (SYK)

Analysis of Income Taxes

Accounting Policy on 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

Stryker Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Stryker Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)