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Microsoft Excel LibreOffice Calc

United Technologies Corp. (UTX)


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

In the ordinary course of business there is inherent uncertainty in quantifying UTC’s income tax positions. UTC assesses the income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, UTC has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated interest expense has also been recognized. UTC recognizes accrued interest related to unrecognized tax benefits in interest expense. Penalties, if incurred, would be recognized as a component of income tax expense.

On December 22, 2017 the TCJA was enacted. The TCJA contains a new law that subjects UTC to a tax on Global Intangible Low-Taxed Income (GILTI), beginning in 2018. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The FASB has provided that companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences, including outside basis differences, expected to reverse as GILTI. UTC has elected to account for GILTI as a period cost, if incurred.

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


Income Tax Expense (Benefit)

United Technologies Corp., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Federal hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden
United States hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden
Current hidden hidden hidden hidden hidden
Federal hidden hidden hidden hidden hidden
State hidden hidden hidden hidden hidden
United States hidden hidden hidden hidden hidden
Foreign hidden hidden hidden hidden hidden
Future hidden hidden hidden hidden hidden
Income tax expense hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. United Technologies Corp.’s current increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.
Future Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. United Technologies Corp.’s future declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Income tax expense Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. United Technologies Corp.’s income tax expense increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Effective Income Tax Rate (EITR)

United Technologies Corp., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Statutory U.S. federal income tax rate hidden hidden hidden hidden hidden
Tax on international activities hidden hidden hidden hidden hidden
Tax audit settlements hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden
Effective income tax rate, before U.S. tax reform hidden hidden hidden hidden hidden
U.S. tax reform hidden hidden hidden hidden hidden
Effective income tax rate hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

Item Description The company
Effective income tax rate, before U.S. tax reform Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. United Technologies Corp.’s effective income tax rate, before U.S. tax reform increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

United Technologies Corp., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Insurance and employee benefits hidden hidden hidden hidden hidden
Other asset basis differences hidden hidden hidden hidden hidden
Other liability basis differences hidden hidden hidden hidden hidden
Tax loss carryforwards hidden hidden hidden hidden hidden
Tax credit carryforwards hidden hidden hidden hidden hidden
Future income tax benefits, gross hidden hidden hidden hidden hidden
Valuation allowances hidden hidden hidden hidden hidden
Future income tax benefits, net hidden hidden hidden hidden hidden
Intangible assets hidden hidden hidden hidden hidden
Insurance and employee benefits hidden hidden hidden hidden hidden
Other asset basis differences hidden hidden hidden hidden hidden
Other items, net hidden hidden hidden hidden hidden
Tax loss carryforwards hidden hidden hidden hidden hidden
Tax credit carryforwards hidden hidden hidden hidden hidden
Valuation allowances hidden hidden hidden hidden hidden
Future income taxes payables hidden hidden hidden hidden hidden
Future income tax benefits and payables, net hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

Item Description The company
Future income tax benefits, gross Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. United Technologies Corp.’s future income tax benefits, gross declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Future income tax benefits, net Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. United Technologies Corp.’s future income tax benefits, net declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Future income tax benefits and payables, net Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. United Technologies Corp.’s future income tax benefits and payables, net increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Analyst Adjustments: Removal of Deferred Taxes

United Technologies Corp., adjustments to financial data

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Current Assets
Current assets (as reported) hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden
Current assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Less: Current deferred tax assets, net hidden hidden hidden hidden hidden
Less: Noncurrent deferred tax assets, net hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Shareowners’ Equity
Shareowners’ equity (as reported) hidden hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden hidden
Shareowners’ equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income Attributable To Common Shareowners
Net income attributable to common shareowners (as reported) hidden hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Net income attributable to common shareowners (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).


United Technologies Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

United Technologies Corp., adjusted ratios

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. United Technologies Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. United Technologies Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. United Technologies Corp.’s adjusted total asset turnover deteriorated from 2016 to 2017 and 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.
United Technologies Corp.’s adjusted financial leverage 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. United Technologies Corp.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. United Technologies Corp.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

United Technologies Corp., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

2018 Calculations

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

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

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. United Technologies Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to common shareowners hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to common shareowners hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

2018 Calculations

1 Net profit margin = 100 × Net income attributable to common shareowners ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income attributable to common shareowners ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. United Technologies Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Adjusted Total Asset Turnover

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

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

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. United Technologies Corp.’s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

2018 Calculations

1 Financial leverage = Total assets ÷ Shareowners’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareowners’ equity
= hidden ÷ hidden = hidden

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.
United Technologies Corp.’s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to common shareowners hidden hidden hidden hidden hidden
Shareowners’ equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to common shareowners hidden hidden hidden hidden hidden
Adjusted shareowners’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

2018 Calculations

1 ROE = 100 × Net income attributable to common shareowners ÷ Shareowners’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income attributable to common shareowners ÷ Adjusted shareowners’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. United Technologies Corp.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

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

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

2018 Calculations

1 ROA = 100 × Net income attributable to common shareowners ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income attributable to common shareowners ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. United Technologies Corp.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.