Hi everyone,
I was curious to know what are the line items encountered in a "Tax Schedule" in a financial model? How is it constructed?
Also, is it common to have this "Tax Schedule" tab in a financial model or not? Relevant for all circumstances???
Thanks for your help.
I work in M&A group and the purpose of the tax schedule is just to see the corp taxes after a merger/acquisition/divestiture. Many aspects of the new company change, including taxes.
In an lbo model you see it side by side with the GAAP tax calculation... Mainly used for the creation of deferred taxes and the carryover of net operating losses... we like to see the "cash taxes" not the hypothetical gaap effectve tax rate
But what are the items in a tax schedule???
MezzCat: what do you mean by "we like to see the "cash taxes" not the hypothetical gaap effectve tax rate", I didn't catch this one...
Thanks!
a company has two books... the GAAP taxes and the taxes paid to the IRS... The assets are depreciated at different rates for each, faster on the for the actual cash taxes paid to the IRS and straight line for GAAP purposes... This innately creates a deferred tax account...
for LBO's, we want to know what this actual cash tax rate is as you want to squeeze as much debt as possible before breaching covenants, and if you aggressively depreciate taxes for IRS purposes (cash taxes), you are able to squeeze more cash out of the company to meet debt obligations.... You GAAP taxes on the other hand maybe alot higher and give you the wrong impression about what you should actually be sending to the IRS in the mail..
deferred taxes, NOLs, cash/irs txes, exemptions, etc..
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