SEC Filings

10-K
INTUITIVE SURGICAL INC filed this Form 10-K on 02/02/2018
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Deferred income taxes reflect tax carry forwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in millions):
 
December 31,
 
2017
 
2016
Deferred tax assets:
 
 
 
Share-based compensation expense
$
79.1

 
$
122.2

Expenses deducted in later years for tax purposes
29.7

 
47.4

Research and other credits
27.5

 
15.6

Other
10.5

 
9.8

Gross deferred tax assets
$
146.8

 
$
195.0

Valuation allowance
(29.4
)
 
(17.2
)
Deferred tax assets
$
117.4

 
$
177.8

Deferred tax liabilities:
 
 
 
Fixed assets
$
(26.3
)
 
$
(25.2
)
Intangible assets
(3.6
)
 
(2.3
)
Other
(0.2
)
 
(0.2
)
Deferred tax liabilities
$
(30.1
)
 
$
(27.7
)
Net deferred tax assets
$
87.3

 
$
150.1

The 2017 Tax Act was enacted on December 22, 2017. The 2017 Tax Act includes a number of changes in existing tax law impacting businesses, including a one-time deemed repatriation of cumulative undistributed foreign earnings and a permanent reduction in the U.S. federal statutory rate from 35% to 21%, effective on January 1, 2018. Under U.S. GAAP, changes in tax rates and tax law are accounted for in the period of enactment and deferred tax assets and liabilities are measured at the enacted tax rate. Consistent with guidance issued by the Securities Exchange Commission (“SEC”), which provides for a measurement period of one year from the enactment date to finalize the accounting for effects of the 2017 Tax Act, the Company provisionally recorded an income tax expense of $317.8 million related to the 2017 Tax Act. Based on information available, the Company estimated the cumulative undistributed foreign earnings to be approximately $1,873.8 million and recorded a provisional estimate of $270.2 million of income tax expense related to the one-time deemed repatriation toll charge, which will be payable over eight years. As a result of the 2017 Tax Act, the Company can repatriate the cumulative undistributed foreign earnings back to the U.S. when needed with minimal U.S. income tax consequences other than the one-time deemed repatriation toll charge. The Company is still evaluating whether to change its indefinite reinvestment assertion in light of the 2017 Tax Act and consider that conclusion to be incomplete under guidance issued by the SEC. If the Company subsequently changes its assertion during the measurement period, the Company will account for the change in assertion as part of the 2017 Tax Act enactment.
In addition, the Company recorded a provisional estimate of $47.6 million income tax expense due to the re-measurement of its net deferred tax assets at a U.S. federal statutory rate that was reduced from 35% to 21%. For the GILTI provisions of the 2017 Tax Act, a provisional estimate could not be made as the Company has not yet completed its assessment or elected an accounting policy to either recognize deferred taxes for basis differences expected to reverse as GILTI or to record GILTI as period costs if and when incurred.
In accordance with SEC guidance, provisional amounts may be refined as a result of additional guidance from, and interpretations by, U.S. regulatory and standard-setting bodies, and changes in assumptions. In the subsequent period, provisional amounts will be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017, by the U.S. Department of the Treasury. The effects of the 2017 Tax Act may be subject to changes for items that were previously reported as provisional amounts, as well as any element of the 2017 Tax Act that a provisional estimate could not be made, and such changes could be material.
The Company adopted ASU No. 2016-09 in the first quarter of 2017, which resulted in excess tax benefits associated with employee equity plans of $102.8 million being recognized in the income tax provision for the year ended December 31, 2017. Excess tax benefits associated with employee equity plans was previously recorded in additional paid-in capital and the adoption of this ASU resulted in reducing the Company’s effective tax rate by 9.4 percentage points for the year ended December 31, 2017. The amount of excess tax benefits or deficiencies will fluctuate from period to period based on the price of the Company’s stock, the volume of share-based instruments settled or vested, and the value assigned to employee equity awards under U.S. GAAP.
The Company’s tax holiday obtained in 2007 for business operations in Switzerland ended on December 31, 2017. The tax benefit from the tax holiday for the year ended December 31, 2017, was approximately $10.9 million, or $0.09 per diluted share. The Company received a new tax ruling in Switzerland for new business operations. The new ruling is effective for years 2018

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