Financial reporting, equity analysis and equity valuation insights for investors| The Footnotes Analyst
Most deferred tax adjustments in financial statements help investors - but not always. The ‘economic value’ of deferred tax assets arising from unused tax losses may be significantly less than the balance sheet figure. However, as a consequence, profit forecasts may be understated, potentially leading to an undervaluation by investors. We estimate that if the £24bn deferred tax asset of Vodafone were discounted to an economic value then it would instead be closer to £8bn, but forecast p...| The Footnotes Analyst
Deferred tax can have a significant impact on the tax charge and hence net income. Although confusing and complex, we think that deferred tax provides very| The Footnotes Analyst
Stock-based compensation can have a significant impact on the effective tax rate. For US companies the effect is driven to a large extent by changes in the stock price. In 2021 this reduced the effective tax rate for many companies; however, in 2022 you could well see the reverse. We use Netflix to explain the effect of stock-based compensation on cash taxes and deferred tax adjustments. The accounting is complex and made even more challenging for investors by differences between IFRS and US ...| The Footnotes Analyst