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Tax Reform Disclosures: Five Examples
Wednesday, January 24, 2018

As corporations continue to file their first wave of financial statements after passage of tax reform in late December, we decided to take a peek at what disclosures they’re making about the law’s likely effects for them…

  • Amcon Distributing said on Jan. 18 that the new corporate tax rate of 21 percent will lead to a $900,000 tax benefit in first quarter 2018. That benefit comes from applying the 21 percent rate to long-term tax deferred liabilities on the firm’s balance sheet.
  • Agribusiness CHS Inc. said on Jan. 10 that it is still studying the consequences of tax reform, and “we expect to record a material tax benefit due to the revaluation of our net deferred tax liability position,” although CHS declined to estimate what that benefit might be.
  • That’s more than we can say for Nike. On Jan. 5, Nike said it expects to incur a material additional income tax expense, primarily related to the transition tax on accumulated foreign earnings, the repeal of foreign tax credits, and the remeasurement of certain deferred tax assets and liabilities.
  • Cal-Maine Foods published an earnings release Jan. 5 saying the new tax rate would be applied to a deferred tax liability of $75.3 million it has on the books, which will result in a smaller liability and therefore a benefit to income tax expense.
  • On the other hand, SuperValu said on Jan. 10 that it will take a non-cash charge of $35 million to $45 million to reduce the value of deferred tax assets it’s carrying.

You get the idea: most companies talking about tax reform so far have been disclosing changes to the value of deferred tax assets or liabilities. We saw an early wave of similar disclosures at the end of December, as large banks disclosed short-term charges for the fourth quarter that sometimes reached into the billions.

Those are the short-term effects of tax reform. Over the long term, companies should, presumably, start reporting larger net income and lower effective tax rates, as the one-time adjustments of tax assets recede and the permanent lower rates take hold.

Calcbench subscribers can always monitor what companies disclose about tax reform by using the Interactive Disclosures page. Just set the company (or companies) you want to research, and enter “tax reform” or some similar term in the text search box on the right-hand side. Then feast on the results.

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