Comp model adjustments
I'm looking at a company's income statement that has a "restructuring charge" and a "write-off of in-process R&D" expense BEOFRE the EBIT line.
However, when adding these back to get adjusted net income, the restructuring charge IS tax effected and the write off of in-process R&D is not
Why is that?
Doing this obviously leaves the tax-shield associated with the write off of the R&D while it completely eliminates the effect of the restructuring charge. I am just not sure why both are not completely eliminated?
Thanks for any help.
The restructuring charge is post-tax, even though it is above the EBIT line. If you go through the 10K or 10Q, and read the notes, you will see why.
Sorry, I am still confused.
Would you please explain why a restructuring charge IS tax effected when adding back to Net Income and stock-based compensation and in-process R&D are NOT tax effected?
For example:
If I have a $128 restructuring charge and a $77 stock-based compensation expense BEFORE the EBIT line, when adding them back to Net Income the comp model makes the following adjustment:
Net Income = 80.6 + 77 + 128*(1-0.38)
Why is only the restructuring charge tax effected?
I have looked through the filings (where it gives both the net of tax and before tax numbers), but it doesn't explain the rationale behind this.
The difference lies in the fact that restructuring charges are actual cash charges while stock based comp and IPRD are non-cash charges.
So "stock based compensation" and "in-process R&D" are not really tax-deductible items?
Is that why they are added back in whole (and not tax effected) when normalizing net income?
So is there a Deferred Tax Asset associated with these items? (since reported taxes are lower than actual cash taxes paid)?
Help me out on this please
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