So, The Times and Facebook’s tax: tax expert help needed.

Just let me check something here with you knowledgeable people.

The Times carries a story today (from one of their star reporters in fact, who has won a prize for his work on tax avoidance). He says:

Accounts filed in the US last week revealed that it accepted a $2.46 billion liability in respect of “uncertain tax positions” arising from investigations in countries including the US and Ireland. The liability is more than double the $1.19 billion set aside in 2014.

OK.

Last night politicians demanded that HMRC recoup a fair proportion of Facebook’s $2.4 billion fund. The company has for years been accused of legally avoiding tax in Britain by registering sales of digital advertising through Ireland as well as minimising taxable British profits by issuing share options to UK-based staff.

“It would be very worrying if yet another multinational technology company got an easy ride from the British taxman,” John McDonnell, the shadow chancellor, said. “Now we know that Facebook has set aside this money George Osborne must make sure Britain gets its fair share.”

Hmm. So, the 10k is here.

The $2.4 billion fund is actually this:

The components of other liabilities are as follows (in millions):

December 31, 2015 2014
Income tax payable
$2,458 $1,190

This is what he’s talking about. This is the super sekkrit fund: the standard provision for income tax liabilities.

Now, I’m tending toward the idea that this is outright fuckwittery but anyone care to tell me differently?

65 thoughts on “So, The Times and Facebook’s tax: tax expert help needed.”

  1. I’m not sure about US tax, but I believe that you have to pay the liability in quarterly instalments through the year, so it should all be paid by the end of the year.

    Your provision would then be for uncertain tax positions, plus any error in your estimated instalments that you haven’t yet paid – in other words, it’s going to be almost entirely the uncertain tax positions figure.

    Looking briefly at the 10K, the uncertain tax positions seem to be mostly about share-based compensation.

    With a 40% ETR, I think it would be hard to accuse Facebook of egregious tax avoidance – although I suppose you could complain that they are deliberately paying 35% in the US to avoid paying 20% over here. Which would be madness, quite apart from the fact that the US would give them credit for the UK tax so it would be 20% plus 15% there.

    In my experience, US groups really don’t care about UK tax if it’s going to be taxed in the US, due to this very credit, so they have no incentive at all to reduce the UK tax bill.

  2. US forward tax is paid on the basis of last years profits. So a fast growing company will be a long way behind.

  3. Are you sure that’s the case for large corporations? A quick glance through PwC’s website (other Big 4 firms are available) suggests otherwise.

  4. Dunno, but the cashflow statement (pg 61 of the 2015 accounts) shows that their actual payments of tax are rather less than the accounts charge:

    Tax charges of $273m in 2015, $184m in 2014, compared to P&L tax charges of $2,506 in 2015, $1,970 in 2014 and $1,254 in 2013.

    So even if they’re paying a year in arrears, most of the tax charge isn’t feeding through into actual payments.

    Could be all sorts of things:
    – Could be timing differences (up-front allowances or R&D credits, where the cost of the investment won’t hit the P&L until later, so you set up a tax charge which will reverse as the investment is charged).
    – Could be the US tax they’ll have to pay when they repatriate offshore profits.
    – Could, as they’re suggesting, be a provision for losing battles over their tax bill.
    – Could be something to do with their share options – there’s $1.7bn bouncing round the cashflow statement for “Excess tax benefit from share-based award activity” – dunno what that is – some Yank thing?

    They do make provisions for their tax planning going wrong, but there’s no quantification of it:
    “We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination
    by the taxing authorities based on the technical merits of the position. We make adjustments to these reserves when facts and circumstances change, such as the
    closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of any reserves that are considered appropriate, as well
    as the related net interest and penalties.”
    (pg 64 of the 2015 accounts).

    There’s some more on page 78 of the 2015 accounts, which shows that the tax charge is pretty much all for US taxes – only tiny amounts for foreign taxes. That makes me think that most of the tax charge is a provision for the US tax they’d have to pay if (when) they repatriate their offshore earnings.

  5. Sorry, 2nd paragraph should read:
    “Tax actually paid (cashflow) of $273m in 2015, $184m in 2014, compared to P&L tax charges of $2,506 in 2015, $1,970 in 2014 and $1,254 in 2013.”

  6. “minimising taxable British profits by issuing share options to UK-based staff.”

    Fuck me. Can it get any more witless?

  7. The $2.46 billion has virtually nothing to do with any country outside the USA as it is the unpaid balance of taxes recognised in the P&L account in 20125 and previous years, just over 95% of which is US tax.
    Very, very, elementary accounting.
    So John McDonnell had better queue up outside the US Treasury building if he wants any of it!
    This is so obvious that it is difficult to blame fuckwittery, malice seems more plausible for a change.
    Interestingly, the 10k shows that the US tax charge for the year exceeds US pre-tax income for the year. This is because it is providing for US tax on all income that it thinks it might repatriate at some undefined date in the future. The “foreign” tax charge for 2015 is less than 4% of foreign profits for the year (and lessthan state taxes).

  8. Sorry, I was mixing up two things; the $2.46bn is indeed the cumulative reserve for “uncertain tax positions”. Page 51 of the 2015 accounts.

    I was confusing it with the $2.5bn P&L tax charge for 2015 (pg 41).

    But I agree with john77 – the P&L tax charge (pg78) is almost entirely US Federal tax, and has been for years, so they can’t be expecting to pay much of that to anyone else.

  9. “The company has for years been accused of legally avoiding tax…”

    How can you be accused of doing something legally?

  10. Should someone not be enlisting the help of the No 1 tax expert in the UK to do the analysis on the numbers here? Clearly he was not involved in the Times article, as he would have insisted on being given credit in the article and/or payment.

    I believe he may be contacted at the Old Orchard, Downham Market.

  11. @ Andrew Duffin
    Have you never been accused of being a smartarse?
    Some of my friends (most of whom were middle-aged at the time) were accused by an aggressive jogger of being “elite runners” (one of them *had* been – 30-odd years earlier) and so unwelcome in a jogging club.
    Just because it’s legal, doesn’t mean that someone doesn’t want to persecute you for it.

  12. I’ve never done SEC work, but my understanding is that if Facebook was booking a contingent liability of that magnitude for anything, a more complete disclosure of the facts and circumstances in the 10K would be required. Simply booking the liability wouldn’t cut it with the SEC. Material contingent liabilities would have to be disclosed in some detail.

    There’s another issue here. That liability number isn’t a real number… it’s an estimate of the tax liability Facebook would incur if it was taxed on GAAP profits (as opposed to taxable profits). Tax expense and liabilities published in GAAP basis financial statements have nothing to do with actual tax expense and liability figures.

  13. Presumably a provision rather than a liability, if the outcome is uncertain. If you can be bothered to wade through the accounts then you would expect a wordy explanation which may make sense to an accountant. Not exactly front page news. Tax law is now so absurd such that it can take years to agree on the actual liability.

  14. I also suspect that liability Facebook has on its books has been the result of a number of bookings over several years. Had Facebook felt the necessity of booking $2.4 billion contingent liability for UK taxes alone, it would have both been disclosed in the 10K as well as publicly.

  15. Dennis, I don’t think your second paragraph is correct.

    The accounts do show a reconciliation between the P&L tax charge and GAAP times the headline US tax rate, but that’s just an explanatory note – GAAP times tax rate doesn’t actually feed into the P&L charge.

    The contingent liability is an estimate of what they might actually have to pay if the case goes against them (based on probability).

    The tax charge in the P&L is more complicated but basically it’s a combination of the actual tax they expect to pay on that year’s profits, plus deferred tax (tax they expect to pay in future years because of what’s happened this year) and movements in that contingent liability.

  16. The accounts do show a reconciliation between the P&L tax charge and GAAP times the headline US tax rate, but that’s just an explanatory note – GAAP times tax rate doesn’t actually feed into the P&L charge.

    That isn’t how the P&L tax charge is calculated. You also have to include the effects of permanent and temporary differences, which can be substantial. GAAP doesn’t use the Richard Murphy Method of estimating tax expense and liability.

  17. It would appear Facebook booked a $1.27 billion charge in 2015 for uncertain tax positions. Liability of 1.19 goes to 2.46 from 2014 to 2015. Further doubt that Facebook is booking a huge liability for the UK alone.

  18. @ Dennis the Peasant
    (Space for deleted rant about ….)
    The $2.46bn and $1.19bn are *liabilities* for tax provided through the P&L account but not yet paid. This has *nothing* to do with uncertainties about foreign tax. It is 90%+ US tax It is (almost all) tax that will be paid when Facebook remits to the USA profits earned abroad.
    That is why Facebook US tax in 2015 P&L account exceeds US profits. Look at the numbers – US tax on US profit @ 35%=$981m, total US tax $2378m, therefore US tax on foreign profits $1497m; total foreign tax $128m.

  19. I know nothing about tax other than that it is categorised along with death and is more or less equally unpleasant.

    However I was amued to read that they have been accused of legally… doing something.

    Tim I know you’ve made the point a million times, but so see it written by some witless lefty twat who can’t see the irony, is quite funny and sad at the same time.

  20. john77 –

    I have neither the time or inclination to explain how tax expenses and liabilities are calculated and booked under GAAP. Suffice it to say you’ve made the same error in calculating Facebook’s tax expense that Richard Murphy made in calculating his infamous ‘tax gap’. Tim’s written at length about the nature of the error.. I’m sure you can find a few of those posts if you look for them.

  21. I also know nothing much about US tax, but I do know a bit about the US legal system. I find it highly unlikely, on a smell test basis, that the top people at Facebook are doing anything illegal in respect of significant amounts of tax, because the penalties would be punitive and I doubt Zuckerberg wants to spend any number of years in chokey.

  22. @ Dennis the Peasant
    I have merely pointed out that the provision for taxes in the balance sheet (see note 6 in the 10k) is the amount provided through the P&L account and not yet paid. Note 11 details the split of tax provision in the P&L account between US and foreign tax.
    Uncertainties about foreign tax have next to nothing to do with it.
    I should like an apology

  23. Going back a few years to when I was last involved in the FIN48 disclosures for a major multinational, I suspect that everyone could be right here.

    The provision is, I think, largely for amounts taken to the P&L but not yet paid, which are amounts of US tax on foreign profits not yet repatriated, which are therefore uncertain in timing and amount. The same amount therefore shows up as “uncertain tax positions” and as “US tax provided but not paid”.

    But Dennis is right that common sense (as understood in the UK) is a concept which is entirely unhelpful when looking at US GAAP… 🙂

  24. John77 –

    You don’t take a P&L profit number and multiply in by the top federal rate to get to the number you are looking for. In the USA corporations will pay federal, state and local income taxes. All have different rates and the state and municipal entities will only tax a portion of total P&L profits. Tax professionals will develop a blended rate that will be based on a relative sophisticated analysis of where they derive their profits and what rates those profits are taxed at.

    Two things to take away from this:

    1) You can’t puzzle out actual taxes using GAAP numbers, so stop trying.
    2) If Facebook had booked a large contingent liability for taxes in the UK, they would have disclose it in the 10K and through a press release (to help stay SOX compliant).

  25. @ Dennis the Peasant
    Try reading what I actually wrote. If that isn’t too hard.
    The tax liability in the Balance equals cumulative tax provided through P&L minus tax already paid. So foreign tax liability is less than or equal to foreign tax provided through P&L.
    The $2.46 billion does NOT include any contingent liability not provided ion the annual P&L.
    FYI Facebook shows a reconciliation of the 35% tax rate on GAAP profit to actual tax provision and the Cash Flow statement shows cash paid. Are they not GAAP numbers?
    The only significant difference between the 35% headline rate and the actual rate are losses in some overeas countries and share-based payments so 35% is a first-order approximation to US tax rate on US profits – any error is a tiny fraction of the c.$1.5bn of US tax on non-US profits. To argue otherwise is spurious precision.
    No, I am not pretending to be an expert on US tax, because you don’t need to be an expert on US tax to observe that foreign tax is only $128m – you just need to be able to read.

  26. Does anyone understand what Dennis is trying to say?

    Other than that he would like a gold watch, he seems to be contradicting himself.

    As for the watch, a Longines Grande Classique is as elegant as the Patek Phillippe for a fraction of the price.

  27. No, I am not pretending to be an expert on US tax…

    Actually, that appears to be exactly what you are pretending to be.

    I repeat: You can’t puzzle out actual taxes using GAAP numbers, so stop trying.

  28. He equated me to Murphy! Some insults are tolerable – others are not.

    The first thing you did was grab a profit number off a financial statement and apply the top line rate tax rate for federal taxes to come up with a tax expense number. That’s exactly what Murphy does when calculating his ‘tax gap’ bullshit. Wrong numbers, wrong methodology, wrong results.

  29. “As for the watch, a Longines Grande Classique is as elegant as the Patek Phillippe for a fraction of the price.”

    Funny isn’t it. Spend 100 times as much on a car and you get one faster or more luxurious.

    Spend 1000 times as much on a watch and it tells you the same time as a £29.99 swatch.

    It’s not like the time it tells is any more ‘timier’ is it?

  30. As for the watch, a Longines Grande Classique is as elegant as the Patek Phillippe for a fraction of the price.

    That’s not the point, as any watch collector worth his salt will tell you.

  31. @ Dennis the Peasant
    You are just being mendacious.
    The first thing I said was “The $2.46 billion has virtually nothing to do with any country outside the USA as it is the unpaid balance of taxes recognised in the P&L account in 20125 and previous years, just over 95% of which is US tax.”

  32. There is another angle to this story that jumps out at me. It’s this Fr John McDonnell:

    “It would be very worrying if yet another multinational technology company got an easy ride from the British taxman,” John McDonnell, the shadow chancellor, said. “Now we know that Facebook has set aside this money George Osborne must make sure Britain gets its fair share.”’

    Actually is far.more worrying that he Shadow Chancellor demands that politicians trample over the law, over the confidentiality of taxpayers and the neutrality of HMRC to confiscate money from corporate citizens without any legitimate mandate.

    This is Stalinism pure and simple.

  33. The first thing I said was “The $2.46 billion has virtually nothing to do with any country outside the USA as it is the unpaid balance of taxes recognised in the P&L account in 2015 and previous years, just over 95% of which is US tax.

    And in that your are completely and totally wrong.

    Facebook is required – by federal, state and municipal laws – to pay estimated taxes on profits throughout the fiscal year. And they have to real, real close to actual profits or Facebook gets fined by the taxing authorities.

    They will not have billions in unpaid federal, state and local FY 2015 taxes as of the end of the fiscal year, unless you want to argue that the billions are for 4th quarter taxes that were paid in Jan. 2016… which I wouldn’t if I were you.

    The billions are a mishmash of unpaid domestic and foreign taxes, permanent and temporary adjustments required by GAAP and, well, reserves of payment of taxes due if things don’t go their way with certain taxing authorities. Can you puzzle the details out using the financials and SEC filings? No, you can’t.

    I repeat: You cannot puzzle out actual tax information from GAAP financial statements. Not true expense, not true payments, not true liabilities. Period.

    Quit while you’re behind, Little Richard.

  34. AndrewC said:
    “Funny isn’t it. Spend 100 times as much on a car and you get one faster or more luxurious. Spend 1000 times as much on a watch and it tells you the same time as a £29.99 swatch.”

    I suppose the speed of a car is still a function of cost (engine size, clever ways of keeping weight down, etc.), but once a £30 watch is accurate to the extent that no-one can tell it isn’t without an atomic clock, all they’ve got to go on is snobbery.

  35. @ Dennis the Peasant
    Why don’t you bloody well read the 10k?
    Or don’t US tax experts believe in double-entry accounting?
    Facebook states in its accounting policies that it has provided for tax which will be due when it remits foreign profits to the USA.
    Can’t you read?

  36. Little Richard –

    Read Notes 1 and 13 of the 10K. Then read them again.

    I cannot seem to reach you on this point: The numbers you are looking at in the 10K are GAAP basis. They are NOT tax basis.

    The amount of un-repatriated foreign profits booked under GAAP are GAAP basis profits, and that means the actual tax paid by Facebook will NOT be the amount booked under GAAP. The amount actually paid will be calculated using tax basis numbers, NOT GAAP basis numbers.

    Note that the GAAP basis number includes adjustments for all sorts of estimates (see Note 13 to get a bit of an idea of what those estimates might involve) required under GAAP and may or may NOT be allowed under tax law at the time or repatriation. The note explicitly states that. They are NOT booking the amount they expect to actually pay… They are booking the amount they would expect to pay IF THEY WERE REQUIRED TO CALCULATE THE TAX DUE USING GAAP.

    You cannot get from GAAP basis tax numbers to tax basis tax numbers using financial statements and notes to the financial statements. Period.

    GAAP doesn’t calculate tax expense and liability using tax law or tax code. It calculates tax expense and liability starting with tax law or tax code and then modifying it to meet the requirements of GAAP AS AN ACCOUNTING SYSTEM.

    Tax system… One type of accounting system. GAAP a different type of accounting system. Do they meet? Not on financial statements prepared using GAAP. Were they meet is on the corporate tax return, Schedule M-1. And guess what? That isn’t available to the public.

  37. In US tax, there are all kinds of variables that maybe even the omnicompetont John might know. However, I would prefer not to burrow into the 10k. Surely you can see the guess for the income statement provision, split by current and deferred/contingent elements. Then you look at the balance sheet for current liabilities and long term liabilities, and I seem to recall the SEC wanting a split of the long term liabilities by likelihood. In the UK, the gap between the way the code depreciates buildings over 20 +years against the tax allowances creates a potential tax liability. Similarly, a building in the City of London will create a potential tax liability that

  38. Requires a tax provision. Is there anything in the 10k that mentions deferred UK taxes? Is it all about offshore profit parking? Do we know?

  39. “Can you puzzle the details out using the financials and SEC filings? No, you can’t.”

    Exactly so Dennis. One wonders how John McDonnell managed then.

  40. A person with subject matter knowledge – Pellinor – referred to share option grants in the UK. He might be onto something. Specific technical knowledge is what counts here, rather than years of knowing everything and generally being wrong.

  41. I think the explanation rests on the fact that McDonnell has a touch of Murphy-esque brilliance to him.

    You don’t get invited into Jeremy Corbyn’s shadow cabinet just because you’re an over-educated moron who has spent years career doing little more than pandering to trade unions while trying to jump-start your political career.

    Then again, he could just be another Labor politician Corbyn slept with…

  42. John77 –

    Of course you know that the tax calculated on offshore profits presented in the financials are not only the taxes calculated via GAAP, but taxes calculated via GAAP on offshore profits calculated by GAAP.

    Facebook doesn’t use a profit from its UK corporate tax return to calculate the tax or the liability in the financials… It uses a profit figure generated by adjusting the actual taxable profit to an amount that would theoretically be due if calculated via GAAP.

  43. How can you be accused of doing something legally?

    Andrew Duffin I accuse you of breaking no laws while posting this. I could ask you to prove me wrong but what it the point in a system that believes you are innocent until proven guilty?

    So if I misinterpret tax and GAAP incorrectly* Facebook is planning to pay $2.4B in tax for the year for GAAP purposes. That they won’t actually be paying that amount due to tax laws has is important as the color of the sky.

    *I don’t claim to be a tax or GAAP expert. Not being an expert I hope that my comprehension mistakes balance out and when the experts figure it out the numbers will not be wildly different for what I come up with.

  44. No one here seems to get it…

    The fact that GAAP doesn’t allow you to actually know how much a corporation actually pays in taxes is not a bug. It is a feature.

    Who do most accountants work for? Businessmen.

    How many business do you know who’d just love to have their tax information in the public domain? None of the sane ones, that’s for sure.

    Because Richard Murphy. And assholes like him.

    So the accountants decide, well, when it comes to reporting tax figures in financial statements that will be made public, we’ll use a methodology that is theoretically consistent with the system used to prepare the financial statements, but has no actual relation to the actual figures generated under the tax systems encountered by the corporation in the course of actually doing business.

    Everybody (and by everybody I mean the businessmen and the accountants) is happy. The businessmen get to hide their tax information from public scrutiny and the accountants get lots of extra fees for fucking around generating “GAAP basis” tax figures for the financials.

    See how it works now?

    And by the way, IFRS isn’t really any better in this area than GAAP… So hold off on the Euro superiority, will you?

  45. Well, I don’t know much about tax law, but I do know what I like.

    And one thing I like about the US system is that the tax year starts at the beginning of the year, and ends at the end of the year.

    April 6th or whatever is somehow more British, and probably does confuse and annoy the French. But our laws shouldn’t be made with only that objective in mind. There should always be a secondary justification.

  46. @ Dennis the Peasant
    Can you get it into your head that the $2.46bn under discussion by Tim is the figure in the 10k?
    Can you understand “taxes recognised in the P&L account in 2015 and previous years”? You seem not to understand “recognised” because you tell me that I am completely wrong because you don’t want to read the 10k.
    If and when you read Note 13 you can see that of the $1268m increase in the provision less than 10% was foreign tax. So that’s a provision of over $1bn for tax that Facebook *says* that it will, at some future time (but not yet) owe to the US government.
    No-one except you thinks McDonnell cares two hoots about the peculiarities of the US tax code on deductions from Federal taxes in respect of state taxes or accelerated depreciation allowances or deductibility of pork barrels. McDonnell is latching on to a figure for provisions for tax in the 10k. This is a figure which Facebook says it will some day pay to the US Treasury (unless, of course, …) not to *any* foreign country.

    FYI The cash flow statement under IFRS *does* tell us how much tax the company actually pays. It doesn’t show how it is worked out.

  47. D the P,
    “When exactly were the terms “British” and “Efficient” synonymous?”

    Have you never seen a queue?

    What happens when you get to the front of one may be a frustrating disappointment, however that is not the point.

  48. Little Richard –

    I understand that you and reading comprehension aren’t close, but it would be nice if you’d visit each other occasionally.

    Can you get it into your head that the $2.46bn under discussion by Tim is the figure in the 10k?

    You don’t seem to understand that the figures in the 10K are GAAP basis. That’s what a 10K is… the SEC format for publicly held companies to present their GAAP basis financial statements to both the SEC and the public.

    Not tax basis, GAAP basis.

    Every figure you’ve thrown out there is GAAP basis, and is worthless for analysis purposes because they cannot be adjusted to tax basis with the information publicly available. Raving on about the figures in the 10K simply points out that you don’t understand the purpose of a 10K, or how it is prepared.

    By the way, if you’d actually read what I’ve written about, you’d have known I directed you to both notes 1 and 13. If you want to convince others that I don’t know what I’m talking about, it would be best if you actually knew what I was saying.

    McDonnell is latching on to a figure for provisions for tax in the 10k. This is a figure which Facebook says it will some day pay to the US Treasury (unless, of course, …) not to *any* foreign country.

    No, that is the figure that Facebook says it would one day pay the US Treasury if it prepared its tax return based on GAAP rather than the US tax code, which I’m fairly sure the US Treasury would object to. The fact that you and McDonnell know fuck all about financial and taxation accounting is why the two of you have latched onto that figure.

    John McDonnell isn’t in Corbyn’s shadow cabinet because he was the smartest guy in the room. He’s in the cabinet because he was the guy in the room that said “yes”. There’s a difference there, and it’s important.

    FYI The cash flow statement under IFRS *does* tell us how much tax the company actually pays. It doesn’t show how it is worked out.

    I’m well aware of what is in the IFRS cash flow statement. Given that you aren’t presented with enough information to analyze it, it really isn’t of much use now is it. Score another one for the accountants.

  49. Little Richard –

    Please note that what I said was this:

    And by the way, IFRS isn’t really any better in this area than GAAP…

    That is not the same thing as saying there isn’t any tax information available under IFRS. There is, as you pointed out. It just isn’t of any real value, which makes it no better than the information provided under GAAP, as I pointed out.

    Thanks for backing me up on that one.

  50. “Jack C

    Well, I don’t know much about tax law, but I do know what I like.

    And one thing I like about the US system is that the tax year starts at the beginning of the year, and ends at the end of the year.

    April 6th or whatever is somehow more British”

    All to do with the change from Julian to Gregorian calendar.

  51. And one thing I like about the US system is that the tax year starts at the beginning of the year, and ends at the end of the year.

    I’m sure the accountants just love that their busiest time of year falls over Christmas and New Year.

    It annoys me in my day job when some inexperienced buffoon chooses 31st December as the expiry date of a contract – “to keep it neat”. Which means you’re doing contract renewals over Christmas otherwise you have uninsured vessels, vehicles, and people roaming around your oilfield, and trying to call people on January 1st to find out where the paperwork is. It’s stupid.

  52. Ignoring the lunacy of certain left wing pratts for a moment… And also wafting cotton wool over the differences between uk and us accounting and tax codes; with tax, and with much else, the starting point is known liabilities. Which for corporation tax is accounting profit adjusted to taxable profit at tax rates. For multinationals, the complexities of transfer pricing and the vagaries of multiple taxing authorities add a significant layer of complexity to what is already a stupidly complicated exercise. The resulting figure is a best guess, or what accountants term a provision. The chances of the actual liability being the same are as near to zero as makes no difference. However the accounting is simple, for which we can thank a long dead Franciscan friar.

  53. “I’m sure the accountants just love that their busiest time of year falls over Christmas and New Year.”

    Eh? Why would that follow?

    Deadlines are something else entirely.

  54. @ Dennis the Peasant
    Facebook’s tax liability for US tax on its US profits may be your area of expertise but it is not the subject of debate.
    The subject of debate is the $2.46m provision for tax liabilities in the 2015 form 10k (and the increase from the $1.19bn at end-2014) and McDonnell’s wish to pinch some of it.
    How long will it take for you to get this one simple fact into your head?

  55. @ Dennis the Peasant
    “I repeat: You cannot puzzle out actual tax information from GAAP financial statements. Not true expense, not true payments, not true liabilities. Period.”
    “And by the way, IFRS isn’t really any better in this area than GAAP”
    “FYI The cash flow statement under IFRS *does* tell us how much tax the company actually pays.”
    “I’m well aware of what is in the IFRS cash flow statement.”
    Shome mishtake, shurely?

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