Meritor Acquisition and 2022 Financial Results
Table of Contents
The India Tax Law Change resulted in the following adjustments to the Consolidated Statements of Net Income for the year ended December 31, 2020:
In millions
Equity, royalty and interest income from investees
Income tax expense
(1)
Less: Net income attributable to noncontrolling interests
Net income statement impact
(1) The adjustment to income tax expense includes $15 million of favorable discrete items.
Favorable
(Unfavorable)
$
37
17
(19)
35
At December 31, 2022, $5.2 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside the U.S. for which deferred taxes were not provided.
Determination of the related deferred tax liability, if any, is not practicable because of the complexities associated with the hypothetical calculation.
Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets (liabilities) were as follows:
In millions
Deferred tax assets
U.S. and state carryforward benefits
December 31,
2022
2021
$
272 $
218
Foreign carryforward benefits
Employee benefit plans
Warranty expenses
Lease liabilities
Capitalized research and development expenditures
Accrued expenses
Other
Gross deferred tax assets
Valuation allowance
527
177
258
254
458
445
110
108
238
174
111
126
74
2,163
1,387
(704)
(360)
Total deferred tax assets
1,459
1,027
Deferred tax liabilities
Property, plant and equipment
(369)
(272)
Unremitted income of foreign subsidiaries and joint ventures
(210)
(197)
Employee benefit plans
(311)
(355)
Lease assets
(108)
(105)
Intangible assets
Other
(435)
(44)
(50)
(29)
Total deferred tax liabilities
Net deferred tax (liabilities) assets
(1,483)
(24) $
(1,002)
25
Our 2022 U.S. carryforward benefits include $272 million of state credit and net operating loss carryforward benefits that begin to expire in 2023. Our foreign carryforward
benefits include $527 million of net operating loss carryforwards that begin to expire in 2023. A valuation allowance is recorded to reduce the gross deferred tax assets to an
amount we believe is more likely than not to be realized. The valuation allowance is $704 million and increased in 2022 by a net $344 million primarily due to the Meritor
acquisition. The valuation allowance is primarily attributable to the uncertainty regarding the realization of a portion of the U.S. state and foreign net operating loss and tax
credit carryforward benefits.
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