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Accounting Q - Net loss AND paying taxes


ritrading
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https://www.sec.gov/Archives/edgar/data/1041657/000114420415009981/v400218_10k.htm, page 49

 

I've been looking at Radio One and noticed that their interest expense is bigger than their operating profit. I thought this would mean they wouldn't be paying taxes, but doesn't appear to be the case in the past couple of years. What's going on here? I can see how this might happen in a multi national corporation with different divisions having profits and others having losses, but doesn't seem to be the case here.

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Just had a brief look so I could be missing something, but I don't believe they are paying cash taxes.

 

"During the year ended December 31, 2014, the provision for income taxes increased to approximately $34.8 million compared to approximately $28.7 million for 2013. The increase in tax provision was due to the impairment of long-lived intangible assets that reduced the deferred tax liabilities (“DTLs”) and related deferred tax expense for 2013. For the year ended December 31, 2014, the income tax provision consisted of deferred tax expense of approximately $34.3 million related to temporary differences due to tax amortization of indefinite-lived intangible assets, and current provision expense of approximately $558,000. For the year ended December 31, 2013, the income tax provision consisted of deferred tax expense of approximately $27.3 million related to temporary differences due to tax amortization of indefinite-lived intangible assets, and current provision expense of approximately $1.4 million. The reduction of current tax expense was primarily attributable to certain state restructuring activities. The Company continued to maintain a full valuation allowance for its net deferred tax assets (“DTAs”). We do not consider DTLs related to indefinite-lived assets in evaluating the realizability of our DTAs, as the timing of their reversal cannot be determined.

 

The tax provision and offsetting valuation allowance resulted in an effective tax rate of (439.2)% and (183.2)% for the years ended December 31, 2014 and 2013, respectively. The annual effective tax rate for Radio One in 2014 and 2013 primarily reflects the change in DTLs associated with the tax amortization of indefinite-lived intangible assets.

"

 

Looks like they paid $1.016 million in cash taxes in 2014.

 

https://www.sec.gov/Archives/edgar/data/1041657/000114420415009981/v400218_10k.htm, page 49

 

I've been looking at Radio One and noticed that their interest expense is bigger than their operating profit. I thought this would mean they wouldn't be paying taxes, but doesn't appear to be the case in the past couple of years. What's going on here? I can see how this might happen in a multi national corporation with different divisions having profits and others having losses, but doesn't seem to be the case here.

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Thanks for that. I'm having some trouble wrapping my head around this statement.

 

"The increase in tax provision was due to the impairment of long-lived intangible assets that reduced the deferred tax liabilities (“DTLs”) and related deferred tax expense for 2013."

 

Is this saying that they've recognized an impairment loss for the said asset in the current quarter, and as a result requires decreasing the estimated tax losses in the future quarters? I guess it makes sense if I really think it through... amazing how there seems to be an unlimited number of ways net income can be manipulated. I see the 14.9M writeup in 2012 and then the same 14.9M written back down in 2013.

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AIUI you cant usually use asset impairments to offset tax, otherwise everyone would be writing down all their assets just to avoid tax. So if they are profitable excluding asset impairment that will be why they record an income tax liability.

 

If they have an intangible asset with indefinite life but are amortizing it, then that could be why they are getting taxed yet on paper are unprofitable.

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